Having worked for Gen Re
for 20 years, most recently as Gen Re
Australia Managing Director and Property/Casualty Manager of the Asia Pacific region, Pietro Toffanello
is in a good position to identify the big trends facing the reinsurance world.
With alternative capital being a hot discussion topic on the boardroom agenda, he says a big question is about how resilient this new capital would be in the face of certain catastrophes.
“If you look at how complex dealing with the Christchurch quakes has been it has really shown the catastrophe business is not necessarily what we would define as short tail,” he told Insurance Business.
“How this would coincide with the time horizon of some of these investors is to me a big question mark. A lot of these firms they like to commit their capacity for a defined period of time, which is sometimes very short, but reinsurance can hardly be placed with capacity that has an expiry date attached to it.
“Some of these challenges you have in terms of insurance companies needing to recover from reinsurers regarding the Christchurch quakes, these are really complex matters and you want to have someone there who understands the issues and is committed to the market.”
Toffanello said one of the effects of this amount of capital available today is it will prompt companies to rethink their strategies in the way they deal with customers.
“Differentiation is key - being just like everybody else is no longer going to be a strategy,” he said.
This is just one of the big trends impacting on the reinsurance world.
The second, he said, revolved around living in an era of extreme climate events.
“We are seeing many different examples over time, some become insurance events and some don’t, but I think we always need to learn from them.”
The third trend is about regulation and regulators being more active than ever.
“As new standards and requirements are being introduced and discussed globally, the evolving regulatory landscape will continue to drive capital requirements – and this reinsurance buying strategies – with the ultimate effect of pushing companies to improve the way they manage risk and internal governance in general.”
Next is the impact of technology.
“It’s a trend by itself, but it’s also a massive accelerator of everything else. It’s not just about big data which is definitely a topic.
“The availability of data, and the ability to process them, has increased exponentially. At the same time, we are now facing an unprecedented level of complexity, with far-reaching implications on our business decisions. We now have the data, but the question is what are we going to do with it?
“This is the challenge and first movers will surely have an advantage.”
He cited the statistics which revealed mobile technology has become the number one way to access the internet, and no longer computers.
“The technological progress has brought us unprecedented opportunities and has enabled us to enjoy improved quality of service and standard of living, whether at work or during our free time. Our ability to communicate, travel, be informed, and interact with people beyond space boundaries has increased dramatically.”
The effects of digitalisation on privacy were equally ‘massive’, he said. “It’s really all connected with the digitalisation of our life and the way of dealing with data, but while wanting to be protected and secure as well.
“The next steps are just around the corner: we own more and more intangible assets, and the technological development of driverless car is moving fast. This triggers a need for different insurance products and a constant re-evaluation of the underlying exposures, with cyber risk definitely being one of the key areas to watch.”
The challenges to reinsurers were more than just understanding a trend when it happens.
“It’s about trying to anticipate it and continuously reassessing your assumptions. The insurance world is really about risk: understanding risk, assessing it, and underwriting it. This is a long term game and I strongly believe that better underwriting companies will always outperform the rest of the market. This is at the foundation of what Gen Re
does and it is the best way to assure our clients we will be able to honour all our commitments at any point in time, so they can meet theirs.”
Read part one here: Can reinsurance be sexy?