24 October 2017 Insurance

Incumbents must absorb disruptive forces

Being an incumbent and established player is a natural advantage in the re/insurance market, but only when combined with a receptive approach to disruptive newcomers, according to panellists in Guy Carpenter’s Symposium at Baden-Baden on Sunday.

Panellists James Nash, president, international, Guy Carpenter; Joachim Wenning, chairman of the board of management, Munich Re; Adrian Jones, head of strategy & development, SCOR P&C; and Luca Albertini, CEO of Leadenhall Capital Partners, agreed that incumbents’ staying power is strengthened when they identify and absorb disruptive capabilities.

Albertini added that it is important to choose carefully when deciding which innovators to partner with. “You need to have your own track record and then identify the initiatives you want to partner with—a lot of people are good at ideas but one good idea may be a weak competitive point,” he said.

Following on, the panel agreed that legacy systems can put incumbents at a disadvantage unless they invest in improving them. More broadly, they agreed that incumbents need to continually drive change within their organisations, making innovation very much an activity the whole company is involved with rather than the remit of a single department.

“There is so much innovation being driven through our existing underwriters who are constantly coming up with new ideas based on things they have observed in the marketplace,” said Jones.

The panel then discussed the effects of recent nat cat losses, in particular how they will be felt in the January 1 renewals.

Nash said it remains to be seen how the losses will hit individual players, but he hopes that reinsurers will approach the renewals on a case-by-case basis.

“We don’t know how the losses will fall on the industry—they will be asymmetric; it will be a capital event for some market participants but probably not for others,” he said. “I hope reinsurers will behave rationally towards the renewals, not having a broad-brush approach but treating each customer differently.”

Wenning added that with insured losses from Harvey, Irma and Maria adding up to $100 billion, the industry will clearly be taking steps to earn back its assets.

“If that is not possible after such events the industry will have become less attractive than it was thought to be and the shareholders will have concerns. An appropriate balance can only be one where we earn this back—how much back and how quickly, I cannot predict.”

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