Tag Archives: Monte Carlo

Reflections from Rendezvous: Innovation to Drive Growth in the Global (Re)Insurance Industry

Each year, the (re)insurance industry meets at the Rendezvous in Monte Carlo to discuss pressing issues facing the market. This year, my colleagues and I had lively discussions about the future of our industry, explored what’s top of mind for our clients and partners, and shared our own perspectives.

Source: The Fairmont Monte Carlo

Over the course of the week, a number of themes emerged.

The industry is at an inflection point, poised for growth

The (re)insurance industry is at an inflection point. While the existing market remains soft, there was a growing recognition at the Rendezvous that the real issue is innovation for growth. We heard time and again that too much of the world’s risk is uninsured, and that (re)insurers need strategies to expand coverage to catastrophic events. Not only in the developing world, but in established markets such as the U.S. and Europe.

Flood risk was of particular interest and discussion at the event. Against the backdrop of a changing climate and a growing concentration of exposures, flood losses nearly doubled in the 10 years from 2000 to 2009, compared to the decade prior. With better data and models, (re)insurers are growing confident they can underwrite, structure, and manage flood risks and provide solutions to meet growing global demand.

In many conversations we shared our thesis that the world’s exposures are evolving from assets@risk to systems@risk. Economic growth and activity is vulnerable to disruption in systems, and innovation, supported by models, data and analytics, is needed to provide new forms of coverage. Take cyber, for example. Insurers see significant opportunities for new forms of cyber risk coverage, but there are fundamental gaps in the industry’s understanding of the risk. When the market is better able to understand cyber risks and model and manage accumulations, cyber could really take off.

Alternative capital is no longer alternative

Amidst a general sense of stability—in part due to more acceptance of the “new normal” after falling prices and a number of mergers and acquisitions, and in part due to a very benign catastrophe risk market—there is a shifting dynamic between insurance-linked securities (ILS) and reinsurance. Alternative capital is now mainstream. In fact, one equity analyst called the use of third party capital a “fiduciary duty.”

Risk is opportunity

I was motivated by how many industry leaders see their market as primed for innovation-driven growth. This is not to overlook present day challenges, but to recognize that the industry can combine capital and know-how, increasingly informed by data analytics, to develop new solutions to expand coverage to an increasingly risky and interconnected world. As I recently wrote, risk is opportunity.