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Monte Carlo Digital Forum: Potential BI losses show extent of carriers’ uncertainties

Clearing up uncertainties about exposures and raising rates are top industry priorities

Uncertainty as to the true extent of carriers’ exposures was a key theme of Insurance Day’s second live panel session of the Monte Carlo Digital Forum.

Mike Mitchell, head of property and specialty reinsurance underwriting at Swiss Re, said confusion about the extent of reinsurers’ business interruption losses following Covid-19 shows a great deal of work still needs to be done to resolve uncertainties in reinsurance contracts.

The issue, Mitchell said, “has really underlined that reinsurers underwriting a derivative product of the original business in many cases really don’t have full clarity of the coverage our clients are providing”.

He added: “In fact, in many cases we’ve discovered that our clients don’t have full transparency of the policy wordings they’re providing as well. And that’s really not sustainable.”

The scale of losses in recent years has persuaded the majority of carriers and brokers rates must continue to improve if the industry is to earn its cost of capital.

Paul Juniper, head of product development for AdvantageGo, said technology could be a help in underwriting more profitably.

“The underwriting community needs to question more how things are being done today, and the underwriting community has a big part to play in advancing the technology themselves,” he said. Some progress is being made, he said, adding: “We are seeing new roles come into the market such as head of underwriting automation.

“I think there’s a lot of existing technology out there that people are still not aware exists that can accelerate where we are today.”

Dan Malloy, chief executive of Third Point Re, said the industry needs to “closely review” present rate levels, not least because of the intense pressure low interest rates have put on carriers investment incomes.

Mike Van Slooten, head of business intelligence at Aon Reinsurance Solutions, acknowledged the problem, adding: “If you have any hope of covering your costs of capital with interest rates where they are today, there clearly needs to be some adjustment on the underwriting side.”

Van Slooten also expressed concern more junior members of staff in the industry could be turned off by the extended lockdown.

“There is something being lost in terms of knowledge transfer,” Van Slooten said. “When you’re senior and established and networked, you can have the conversations that allow business to continue to be traded and that’s fine.

“But when you’ve got junior people who learn a lot from being in an office and in the ambient atmosphere of being in the thick of things, that is being lost, and I think that’s a worry. Some of those people may end up disillusioned and feel they’re not very connected to the business.”

Click here to watch a recording of this event.

Insurance Day’s Monte Carlo Digital Forum is brought to you in partnership with AdvantageGo

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