Market should be positive and sell itself
The high level of negativity in the market flowing from concerns around soft rates, low investment returns and subsequent dwindling margins is, in fact, misplaced and ignores many positives the market should instead focus on.
That is the view of John Holm, executive of managing general agent (MGA) investments, Asta Underwriting Management, who said that there are many positives for the market.
One is the success and growth of the MGA sector in recent years, which is driving forward innovation in some parts of the industry.
“The MGA sector is the most entrepreneurial part of the risk transfer industry and that is flourishing,” he said. “We are seeing more teams of young, talented underwriters making this move, which is a very positive thing for the market.”
This dynamic ties in with a wider point Holm makes, which is that he feels the industry ignores the massive opportunity it has to increase the percentage of risks globally that are covered by insurance.
Currently, around 10 percent of all risk globally is insured. This is not simply because of low penetration levels in emerging markets, Holm believes. He makes the point that, in the aftermath of the recent earthquake in Italy, only 17 percent of losses were covered.
“This is in a developed country in Europe,” he said. “There are huge levels of underinsurance.”
He estimates that, even in developed countries, only around 30 percent of risks are insured. “That is a huge market opportunity,” he said. “If you were in a sector with 90 percent penetration you would worry about growth, but the risk transfer industry has the opposite problem.”
To capitalise on this opportunity, he said, the industry needs to go into “sales mode”. He said too many carriers simply sit back and wait for the business to come to them instead of actively developing and selling new products.
The MGA sector can play a part in opening up new markets and helping the industry realise this opportunity, Holm states.
“The MGA sector could be a catalyst but brokers and carriers also need to play their part in selling the industry more,” he said.
