Pandemic brings boom time for the re/insurance industry
Insurtechs are booming and, as a result of the COVID-19 pandemic, these companies, and other agile firms in the industry such as managing general agents (MGA)s and third party administrators (TPAs), look set to play an ever more vital role in the future structure of the re/insurance industry.
Accelerated digital transformation and greater acceptance of working from home created perfect conditions for insurtechs and their ilk to thrive, according to Manuel Escobedo, chief executive officer of Mexico-based holding company Peña Verde, the parent company of Patria Re.
“Digital transformation is fundamental for the re/insurance industry and it will accelerate many changes we’ve gradually been seeing in the past. We were in a sort of simmering momentum towards transformation and because of the pandemic we have really turned the stove up. It will mean the emergence of more insurtechs, definitely,” Escobedo told Intelligent Insurer.
“Ongoing digital transformation will also mean a larger, broader development of the role of MGAs and TPAs,” he said. “There will be continued consolidation in the industry and we might end up in a situation where the largest part of the risk is being carried by very large funds.”
Such funds would deal only with the risk management, he explained, so somebody else will need to underwrite and bundle the product or services for those immense funds.
“Think of the industry as 10 mega funds and then thousands of MGAs and TPAs putting together portfolios of business, bundling them, underwriting them, designing the products and hitting the segments and the niches to originate this business.
“They then funnel it into these risk carriers that deal only with capital management and reserving, etc,” he explained.
Escobedo compared this way of working to the automotive industry, likening the large funds to major car companies that assemble the different components, while thousands of smaller companies manufacture or build the pieces.
This trend towards ever greater reliance on insurtechs, MGAs and TPAs was already happening prior to the pandemic, he said. However, this trend could still be derailed as the world continues to change and more questions are asked about the benefits of globalisation.
