Experts predict that the global insurance industry faced total losses of approximately $125 billion in 2017 and 2018 combined. The losses were a combination of natural catastrophes – including two aggressive back-to-back hurricane and wildfire seasons in North America – and man-made losses, particularly in industrial sectors.
While most people focus on natural catastrophes and extreme weather events (which is understandable given the mass media attention they receive), 2018 also saw “a significant increase in man-made losses” – a trend felt keenly by Swiss Re Corporate Solutions because of the amount of industrial and corporate exposure it has on its books, explained Ivan Gonzalez, CEO North America, Swiss Re Corporate Solutions.
“Industrial exposures cover a lot of different things. It’s very clear that certain industries face certain challenges, depending on how those industries evolve over time,” said Gonzalez. “For example, there are lots of areas around the world with ageing infrastructure. If you have a utilities company with pipes that are very old and have not been properly maintained, you’re going to have a much more significant risk of explosion. We see more issues like that today than we saw 20-years-ago.
“We also see the fact that business is more global and interconnected than ever before. If you think about the production of a car, while it might be assembled in a plant in Canada or the US, the components of that car might have been imported from 30, 40, or 50 countries around the world. Anything that happens in the value chain will have an impact. If there’s an event in Japan, where they produce one component for the engine, that will have an overall implication.”
The business interruption risk that corporations hold today is much more significant than it was 20-years-ago, according to Gonzalez. This is simply because of the level of development in society and the increasing interconnectivity of global industry.
“At the same time, we’ve also seen a bit of a shift in interest from tangible coverage to non-tangible coverage,” the CEO told Insurance Business. “By that I mean, in the past corporations probably only needed to focus on making sure their industrial plant wasn’t going to fall or burn down. Now they’re worried about what happens from a cyber risk standpoint, an intellectual property risk standpoint, and a reputational risk standpoint. The question now is more around how the re/insurance industry positions itself to serve those kinds of risk needs for our clients.”