The latest iteration of Swiss Re’s flagship ‘sigma’ report highlighted how prevailing economic conditions have breathed new life into the global re/insurance market. Improved economic resilience and a high-interest rate environment are driving industry profitability which, in turn, can help the insurance sector attract more capital – driving industry growth and expanded risk transfer capacity.
This expanded capacity is critical fuel to enabling the industry to narrow the global protection gap – recently recorded by Swiss Re as up 5.2% year-on-year to US$385 billion in premium equivalent terms. In recent years, however, the increasing interconnectivity of a risk environment blending geopolitical, economic and regulatory concerns, has led to an increasing recognition of the role risk management has to play in moving the dial towards this more sustainable insurance market.
With three decades of sector experience to his name, Adrian Hall (pictured), head of UK, Ireland, South Africa and EMEA wholesale at Swiss Re Corporate Solutions, has seen the evolution of attitudes towards risk management evolve first-hand. When having conversations with corporate clients and the brokers that support them today, the message is clear, he said - they want to find new avenues to mitigate their own exposures because they recognise the “backdrop of ambiguity” against which they’re operating.
Geopolitical concerns are front-of-mind for corporates in a year when half the world’s population is headed to the polls, but they’re framed by ongoing economic challenges, supply chain concerns, and the pervading threat of climate change impact on the natural catastrophe (nat cat) sector. It’s a ‘polycrisis’ environment, and one seeing corporates from all industries grappling with the question of what it means for them individually.
From Hall’s own conversations – at the recent Airmic 2024 Conference and beyond – two key themes are emerging. The first of these is around climate change and its impact on nat cat exposures. He pointed to the recent sigma report and the protection gap it revealed as a demonstration of the ongoing nature of this challenge and how it is being further complicated by the accumulation and growth of exposed property assets. “We’re seeing exceptional inflationary pressures on property assets, which is then inflating the potential loss, from a nat-cat perspective.”
The second theme is that of supply chain pressures, which are being driven by the lingering impact of COVID-19 but also the geopolitical fallout of conflicts in the Middle East, and between Russia and Ukraine. These events are creating ongoing instability across the wider supply chain, raising concerns from a resilience perspective for large corporates and it’s not one that he foresees changing in the near future.
Reflecting on how he has seen attitudes to risk management and mitigation shift, especially in the last five years, Hall pinpointed the rapid advancement of real-time data, digital-first approaches and generative AI. Each of these factors has led to corporates thinking more holistically about the solutions required to manage the risks they face, which he highlighted is a message being delivered ably by their broker partners. “Our brokers remain a very strong voice in the market,” he said. “By partnering with our brokers, they facilitate us being able to listen to corporates about the risks they face and deliver solutions that resonate with those challenges.”
The question on the mind of corporates is how to navigate the complex risk environment they’re facing and the answer is found in supporting them in finding a more holistic way to think about risk. It goes beyond risk transfer, Hall said, because when you move into the realm of risk partnership and risk insight, that’s where corporates can find solutions designed to navigate them through this tumultuous risk landscape.
As to what these solutions look like, Hall pinpointed three main areas for investment and focus for Swiss Re Corporate Solutions, the first of which is alternative risk transfer (ART). Captives and virtual captives, and the creation of parametric insurance solutions are two areas of heightened interest for large corporates, he said, because they recognise the value these solutions potentially offer their balance sheets.
The growing demand for risk data and services is another market shift being seen as existing and prospective clients alike are displaying high interest in the role risk data has to play in creating solutions to the most pressing risks they face, particularly around climate change and supply chain risks. The third area in which Hall is seeing increased investment, momentum and success is with regards to the organisation’s international business and its ‘Pulse platform’.
“If you look at the challenges facing corporates right now in terms of their global footprint, you understand the importance of having a clear overview of their coverages across the world and having clear visibility on those policies, premiums payments, claims, and risk engineering services,” he said. “That’s where we’re seeing a lot of demand and need from large companies… to have us step in and enable the smooth handling of their international programs.”
Faced with so many ambiguities, Hall said he’s encouraged to see how customers are taking on board what’s happening in the broader risk landscape to invest beyond risk transfer and embrace what’s available in terms of risk partnerships and risk insights.
Deep-rooted customer insights, as informed by a rigorous approach to client and broker feedback, is the way forward, he said, and he emphasised the critical importance of listening to customers as the key to developing a strong proposition. “There is a heightened demand for more risk insights and tools powered by innovative technology. That’s where I’ve seen a change in the large corporate space, and a heightened interest in how large corporates are managing their risk and very much looking forward in the backdrop of the current environment.”
