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L to R_ Mr Tobias Poensgen, CEO, Momentum Capital, Mr Herbert Fromme, Insurance Correspondent, Süddeutsche Zeitung, Mr Dominic Christian, Global Chairman, Reinsurance Solutions, Aon
30 October 2019 Alternative Risk Transfer

Alternative capital expected to persist in re/insurance space, SIRC 2019 delegates hear

Alternative capital may have experienced some significant hits but it is set to remain a clear presence in the re/insurance space, according to panellists speaking on the first day of the 16th Singapore International Reinsurance Conference.

The Deep Dialogue session, titled “Future of the Industry: Outside Insights”, was moderated by Herbert Fromme, insurance correspondent of the German newspaper Süddeutsche Zeitung, and featured Tobias Poensgen, CEO at Momentum Capital, and Dominic Christian, global chairman, Reinsurance Solutions at Aon.

“Insurance-linked securities (ILS) is a nascent market and an interesting disruption of the space,” said Poensgen.

“Like any startup space it will grow and continue; people will learn from the wounds that some of them have taken and move on.”

Asked about the future importance of re/insurance, the panellists agreed that it is recognised as important in relation to peak risks, but not necessarily elsewhere.

“Of course we are important to people’s lives and communities, but we are not sufficiently significant at present to the person in the street,” said Christian.

Discussing the industry’s use of data, the panellists agreed that those in the car insurance space that adopt telematics could leave behind those who do not embrace this data-rich approach.

“In the telematics space, car insurance costs half what you could pay for it from somewhere else,” he said.

“The insurer is happy because it can create many more policies with less capital and that hurts a lot of insurers who still cannot measure how somebody drives.”

On the topic of whether the industry is generally behind when it comes to embracing data and technology, Christian disagreed.

“We are pretty good actually,” he said. “When you are an existing organisation you have legacy systems, and trying to build new systems outside that is harder. Insurtech is not easy at all.”

Poensgen agreed, saying that a high portion of investments in insurtech will not be successful.

“We are expecting that out of 10 investments, half will disappear and the other five will make massive returns,” he said.

Cuts to cyber
Discussing the fact that many insurers and reinsurers have cut cyber capacity, Poensgen said that the key in the cyber space is to work with clients to come up with solutions.

“They need to do their bit as well,” he said. “You can’t simply not have the latest update on your routers and then claim on your insurance instead,” he said, adding that he would not be surprised if Google started to offer its own insurance solutions.

“Some of the cyber insurance disruption will come from the tech companies in that space,” he predicted.

Christian added that the current high level of caution around insuring cyber risks is well placed.

“We understand it today but we will understand it better in five or 10 years’ time,” he said. “There is anxiety about what we are covering: we just don’t have the expertise yet. We are advancing but it’s going to take time.”

Discussing the role of re/insurers in helping create resilience in the face of the current climate crisis, the panellists were optimistic, highlighting the resources the industry has at its disposal.

“If you look at all the analysis that has been done in that space, re/insurers are the closest it gets to moving the dial,” said Poensgen.

Christian agreed that the industry is well placed to make a difference in the global response to climate change.

“We will have a massive role in it, and that we are looking to embrace it,” he said.
“Aon has 700 scientists who think about it every day, and that’s just us.

“As an industry, we make or lose money through our understanding of climate. If we don’t understand climate change better, then we have a problem,” he concluded.

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