“Forward-looking data solutions” will allow (re)insurers to provide the security and resilience that clients need in today’s increasingly connected world concluded a panelist speaking in the opening session of the Insurance Insider London Market Conference, held on the 21st/22nd November.
The power of data was a consistent theme during the conference. The topic was brought to the fore by numerous delegates from Lloyd’s of London, starting with Lloyd’s CEO John Neale who outlined how EC3 is looking to a faster moving future. Later, Lloyd’s panelists admitted that there are minor delays to the implementation of Blueprint 2, which has been set back by up to 6 months, however progress has been made across the marketplace through the delivery of ACORD common data standards. Further news on Blueprint 2 will be announced in December.
Further progress is being made on the Ruschlikon initiative, which connects leading players of the (re)insurance industry to advance processes such as risk placing, technical accounting, claims and settlement using the ACORD Global Reinsurance and Large Commercial (GRLC) Standards.
There is little appetite for a ‘big bang’ approach to developing new digital platforms as the consensus seems to be settling around a more incremental implementation. Conference delegates were reminded that a previous “open banking” initiative led by the top five retail banks experienced delays on the path to implementation, so the London market should relax and celebrate its successes to date though that does not mean there is room for complacency.
There was some debate (and disagreement) as to the necessity, or otherwise, for an “irrefutable” core data record, whilst some panellists outlined the challenges facing delegated authority data, which accounts for 30% of cover holder volumes.
The world of insurer asset management was represented by New England Asset Management in the second session of the first day, which painted a bleak, if realistic picture of the current macro-economic environment. Interest rates are rising 75 basis points (bps) at a time and we can expect to continue to see 50bps changes for a while. Annual inflation of 6% compares to the 2% numbers we have seen in the previous decade, according to New England.
Fixed income investments are now coming to the fore, while it seems that central banks “will be unwilling to help governments anymore.” Fiscal responsibility is the mantra, as “cracks appear in the global financial system.” There are opportunities, of course. Investors can cash in on 5.5% returns for investments in very strong, high quality companies in the private debt market. We could see credit spreads widen.
What does it mean for underwriters? Interest rate returns are on the way up and the premiums are hardening significantly across many areas. It is potentially a favourable environment but there must be a focus on high quality investments to smooth out volatility on the underwriting side of the ledger. In this environment, we were also reminded that the Prudential Regulation Authority (PRA) is taking a keen interest in companies’ liabilities as well as their assets.
Apollo has formed a sharing economy start up Syndicate, according to one speaker who outlined some questions concerning insurer’s balance sheets, which are under threat. Raising capital “used to be a doddle”, according to the speaker’s view, but there has yet to be a single 2023 start up as yet, with traditional sources of funding seemingly hard to come by. Furthermore, in their view, the CAT space is under-performing and it seems that the models are struggling to keep up with a rapidly changing environment, bringing into question their ability to help insurers manage risk effectively.