The FINANCIAL -- AThe current market environment is marked by low interest rates and the ongoing expansion of alternative capital. Volatility in High Growth Markets and the ongoing industry consolidation present additional challenges as well as opportunities. Looking ahead, new technologies are likely to disrupt the re/insurance industry and are expected to have an impact on all parts of the insurance value chain.
This will be visible from underwriting to product delivery and how consumers will buy insurance in the future. At the same time many countries, companies and individuals are still underinsured for key risks, requiring an industry-wide effort to narrow the protection gap, according to Swiss Re.
Michel M. Liès, Swiss Re Group CEO, says: " Let's focus on the fundamental question of how re/insurance can continue to create value amid many changing market conditions. The potential for economic losses from natural disasters and other risks are growing each year while the share of insurance is not increasing. Our industry has the capability and unique knowledge to assess and quantify the risks across so many areas of our everyday lives. Let's use this potential and expand the current reach of insurance by working together."
Generating growth through narrowing the protection gap
Economic development and ongoing urbanisation in highly risk exposed areas are two of the most important factors driving the growing demand for natural catastrophe capacity. Yet there is still a large proportion of the world' s assets that are significantly uninsured. Addressing this issue in all lines of business will be one of the biggest challenges going forward, but also one of the most significant areas of growth for the industry.
Technology a key driver of opportunity
The technological advances on the horizon have the potential to change and disrupt the entire insurance value chain. As technology changes the way people do business, travel and manage their health, it will also change how individuals assess their finances. Smart computing and mobile technologies are gaining trust with consumers and are influencing financial buying decisions. These will increasingly become the trend for buying decisions on insurance as well. Insurers have the chance to utilise technology to bring insurance closer to where people are – and in this way also help to narrow protection gaps in personal insurance lines.
In other insurance areas, technologies such as autonomous cars and their safety elements could make some motor insurance products obsolete over the next 20-30 years. In addition, underwriting models are likely to evolve based on big data and smart analytics. The revolution in cyber technologies, for example, has increased the risks from system malfunctions and cyber-attacks. For insurers there is a much higher likelihood that one event can have an impact across multiple lines of business in an insurer's portfolio. These accumulation risks, together with new risk pools created by technological changes, need to be better understood. Working together with clients and partners, Swiss Re aims to contribute to a "Future Ready" industry.
Christian Mumenthaler, CEO Reinsurance at Swiss Re, says: "Technology will create new risk pools and at the same time it changes the way we assess existing ones. We're already working today with our partners and clients to tackle these future challenges and opportunities."
On track with portfolio steering and risk selection
Smart portfolio steering and risk selection is key to Swiss Re's ability to continue delivering profitable financial returns. This requires a deep understanding of how relevant trends affect losses, exposures and premiums. Therefore, Swiss Re invests into research and development specific to each line of business. Using this research, Swiss Re supports its clients by assessing the risks of tomorrow.
Matt Weber, Swiss Re's Group Chief Underwriting Officer, says: "To get the right portfolio mix, we want to first understand loss, exposure and premium trends by portfolio segment. This then allows us to formulate an ambition for a future desired book of business and then to work toward achieving it. "
Price levels expected to stabilise
Looking ahead, Swiss Re expects price levels to stabilise across many lines of business. Over the long-term, demand for nat cat capacity is expected to continue to increase.