The insurance sector is grappling with the dual challenges of rising premiums and economic uncertainty, said Michel Leonard, chief economist and data scientist at the Insurance Information Institute.
Speaking with AM Best TV during the Global Insurance Forum in Miami, Leonard highlighted insurers' need to maintain solvency while addressing affordability and availability concerns.
Leonard participated in an executive panel on accelerating investment toward energy transformation. He underscored the insurance industry's significant role in this transition, citing its substantial assets under management. He noted that the panel, sponsored by BlackRock, exemplifies how insurers are partnering with asset managers to balance investments in sustainable and traditional energy projects.
“We're investing as an industry or we're also investing in traditional energy so we're able to shape change but also be there for those who are still working in that and help transition,” he explained.
On fostering collaboration between the investment and insurance sectors, Leonard emphasized the insurance industry's ability to reduce investment risks through underwriting. He cited a past project on carbon credits tied to the Paris Accord, where underwriters provided credit backing that mitigated regulatory risk, encouraging investor participation.
“This is a great example of where the flexibility of insurance and the willingness of our industry to innovate. Sometimes we're able to do so where bankers, where lenders aren't able to do so. We work very well together in that regard,” Leonard said.
Leonard acknowledged concerns surrounding economic volatility and its impact on insurance demand. Rising premiums, he said, are a shared concern for both insurers and consumers. He emphasized the industry's responsibility to ensure solvency while collaborating with regulators to manage affordability and availability.
Shifting to life insurance trends, Leonard noted changing consumer behaviors over the past two decades, particularly as many policies are now obtained through employment. He highlighted the potential of life insurance products as both protection and investment tools, especially in the current economic environment.
"I think it's important moments like this of economic uncertainty to look at some of these investment opportunities such as life insurance that now have a panoply of different options, whether they're index funds and so forth," he said.
Looking ahead, Leonard identified extreme weather as a critical challenge for the industry and society. He pointed to Florida as a case study, noting recent improvements in affordability and availability. Leonard stressed the importance of preemptive risk mitigation and public education, areas the Insurance Information Institute prioritizes.
“We've been innovating to always be able to be there working with businesses, with consumers. The most important thing is we do so that we can pay claims. Again, solvency, affordability, and availability are key," he said.
What do you think about the insurance industry's efforts to address rising premiums and climate-related risks? Share your thoughts in the comments below.
