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Perspective

When the Playing Field Is a Minefield

March 16, 2014| Von Tad Montross | L/H General Industry, P/C General Industry | English

Industry people often talk about the playing field and whether it is level or not. But they should also be focused on the players, the weather conditions and the rules of the game.

From a reinsurance perspective, insurers need to think about whether certain new players will stay on the field to see the game through. What will be the effects of extreme weather on the field long-term? Will new technology present an advantage? What if international governing bodies change the rules or move the goal posts?

For insurance companies making a game plan, there’s a lot to think about.

One of hottest topics right now is the influx of alternative capital coming into the industry. There’s no doubting pension funds’ enthusiasm for CAT risk and insurance-linked securities. The big question is, how committed is this capital? The same applies to offshore reinsurance companies backed by hedge funds: Do they have staying power?

Meanwhile, unusual weather patterns are forcing risk professionals to rethink their worst-case catastrophe scenarios and consider how "fat" CAT tails can be. It is a volatile picture. Last year saw insured catastrophes at just over half of the 10-year average of $56 billion, thanks to U.S. hurricanes staying at sea. Yet Haiyan, which hit the Philippines, was the largest typhoon ever recorded.

This year there have been historic floods in Europe while the U.S. had costly winter storms and damaging drought. In Australia, two new colors have been added to the high end of the heat map.

On the Life side, there’s a little more certainty. The aging and the demographic shift we are witnessing is already having a huge impact on our industry and the demand for products and services.

Add wide ranging regulatory changes and the potential impacts of disruptive technology into the mix, and today’s risk management playing field is an evolving landscape. Now more than ever it makes sense to have the support of a team player who is in it for the long game.

Read “The Playing Field” for more on these topics and others affecting our industry.

 

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