Time for Blue Ocean Thinking

A big topic at the Rendezvous was “convergence.” Many in the market are concerned or are noting that the influx of new capital and capacity from the capital markets may be eroding pricing, discipline, and opportunities for traditional players. I have a somewhat orthogonal perspective, and I had a chance to engage in a number of thoughtful discussions on this topic with many of our clients during the course of the Rendezvous.

I believe it is confining to view the entry of new capital with a zero-sum mindset— that is, that more capacity from non-traditional sources means less opportunity for established firms. This is a classic “Red Ocean” perspective, one circumscribed by a view of a constrained set of opportunities. A strategist I admire greatly, C.K. Prahalad, wrote that it is not markets that are mature, but the mindset of management.

Here’s my take on the situation, and the opportunities it presents. Since I co-founded RMS, we’ve been a mission-driven firm. Our “big ideal” is that by providing models and software to help insurers and reinsurers manage risk, they can provide capacity to cover these risks with greater confidence. And by doing so, we and our clients can create more resilient and safer societies. Extending coverage not only enables those impacted by disasters to recover more rapidly, but it provides corporations and individuals the confidence to take risks and creates the market incentives to mitigate risk over time.

The influx of new capital may cause some disruptions in the status quo, but it also provides opportunities for innovation, for (re)insurers to extend coverage to under and uninsured regions and exposures in the world. By working together, the capital markets, coupled with the underwriting expertise of insurers and reinsurers, and the modeling expertise of firms like RMS, will be able to expand the market and make the world more resilient. Time for some Blue Ocean thinking.

Co-Founder and Chief Executive Officer, RMS
Since co-founding RMS in 1989 as a spin-out from Stanford University, Hemant Shah helped build RMS from five colleagues working from his apartment to more than 1,000 professionals providing the world's leading catastrophe modeling solutions to the global insurance and financial services sector. He is widely recognized within the global risk industry as a proactive and influential leader, and has been named “Most Admired CEO” (San Francisco Business Times, 2014); one of the "100 Most Powerful People in the Insurance Industry"(Insurance Newscast, 2005–2011); "Most Influential Person of the Year" (Reactions Global Awards, 2011); and one of the "Top 40 Most Influential" (Global Reinsurance, 2008), among other accolades. Hemant serves on the board of directors of the Casualty Actuarial Society and Praedicat, Inc., as well as on the board of overseers of St. John's School of Risk Management and Actuarial Science (College of Insurance). He is a Director of the RAND Center for the Study of Terrorism Risk Management Policy, a Director on the board of RAND's Institute for Civil Justice, and a Director of the Singapore-based Institute for Defense and Strategic Studies. Hemant is also a Henry Crown Fellow of the Aspen Institute, and part of the Aspen Global Leadership Network.

Leave a Reply

Your email address will not be published. Required fields are marked *