RENDEZ-VOUS DE SEPTEMBRE MONTE CARLO 2019 - ADGO.CO - The Insurer
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RENDEZ-VOUS DE SEPTEMBRE MONTE CARLO 2019 ADGO.CO
2 RENDEZ-VOUS DE SEPTEMBRE
MONTE CARLO 2019
WELCOME TO
ADVANTAGEGO’S RENDEZ-VOUS
DE SEPTEMBRE MONTE CARLO
2019 REPORT
This supplement recaps the key news announced at this year’s
conference. This year, much talk was on the impact of Hurricane
Dorian and the expected losses. The Future at Lloyd’s prospectus
generated a lot of debate ahead of the report being published later
this year, and the topic of rates was a recurring subject, with the
general consensus that reinsurance pricing looks set to be stable to
steadily improving as we head toward 1 January. The adoption of
technology was also widely discussed and the pivotal role it can play
in improving loss ratios and increasing efficiency.
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MONTE CARLO 2019
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MONTE CARLO 2019
ADRIAN MORGAN
GLOBAL HEAD OF ADVANTAGEGO
Q&A WITH
ADRIAN MORGAN
Why does the reinsurance market How important will it be for brokers and
receive such a bad press regarding underwriters to be ‘tech savvy’?
its take-up of technology?
Quite important. Disruptive technology is
I think any bad press is probably unfair, impacting every industry that it’s almost a cliché
mainly because of the limited availability of to say we all need to be tech-savvy to thrive.
technology solutions that deliver clear benefit Insurers are dealing with growing volumes
to reinsurers. In my view, the technology of structured and unstructured data through
solutions offered in the past didn’t go various channels, and those channels are
far enough to excite the industry, nor did multiplying. By 2020, there will be around 40
they directly address the challenges and trillion gigabytes of data (40 zettabytes), and
opportunities that are unique to the industry. it’s also predicted that by 2020, 92% of insurers
It’s down to us, technology providers, to will use unstructured internal claim information
demonstrate that we genuinely understand compared to 46% in 2017 in commercial lines.
the market challenges and can apply the new Underwriters of the future will need to base
disruptive technologies to deliver value. their risk mitigation decisions on a combination
of gut feel and data-driven insights.
Is the market in a better shape regarding
efficiency now than it was five years ago? Will the (re)insurers that adapt the
fastest win market share?
Five years is such a short time, and although
the market is more efficient, not a lot of The (re)insurers who genuinely know their
significant change has happened. customers and put customer-centricity at the
heart of their operations will thrive. That can
However, I think there has been a lot of effort mean using data in a more intuitive way to
from all sides to begin to reduce inefficiencies. assess risk more accurately or integrating new
There have been some watershed moments technology within legacy systems. It can also
in the drive for efficiency with the London mean attracting a more diverse and tech-savvy
Market’s announcement that 250,000 firm workforce, or, retreating from loss-making lines
orders have been bound on PPL, and over of business and entering new or niche markets.
1,000 people logging onto the platform daily. Adapting comes in various shapes, but I think
John Neal’s Future of Lloyd’s prospectus is all that the core value of any transformative
about building a more efficient and successful plan is to put the customer’s needs first and
insurance and reinsurance marketplace, and ensuring that you have an intelligent data
technology is going to play a big part in those strategy. Digital transformation must be part
initiatives. So, with more technology solutions of the plan; it’s more likely that you will gain
and options available, and the need to become efficiencies and grow business with smart
more efficient, I’d like to think over the five technology than without it.
years we will see significant positive change
across the industry.
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MONTE CARLO 2019
What role can the take-up of Does the (re)insurance market
technology have on improving loss have the requisite information to
ratios within P&C? underwrite effectively?
Implementing technology to tick the digital If you ask the market, it would say yes. Our
transformation box won’t necessarily improve recent underwriting survey showed that the
loss ratios. Implementing the right technology majority (67%) of respondents believe that
will be invaluable as better risk analysis leads the market has enough relevant data to help
to better underwriting decision, and ultimately underwriters. However, comments left by
more profitable business. The market knows some participants suggest that more data is
that the right technology can improve loss available in only certain lines of business, and
ratios. Our survey showed that respondents that some data is captured in a way that it is
were mostly positive about the impact of not actionable, unstructured and sometimes of
technology on underwriting quality in the poor quality. Other comments expressed the
future. Some 65.5 percent of respondents felt view that risk data should be pooled across
that there would be a positive impact. The different companies to increase efficiency, and
market understands the value of technology, that data needs to be passed from underwriter
and they are counting on us to deliver the right to broker to client more efficiently. I think these
solutions. At AdvantageGo, we are focused comments are reflective of what I see when
on supporting carriers to write better risk, to I speak with customers. Many EDM’s don’t
control and monitor exposure, aggregates have access to the level of data granularity
and capacity. We don’t want to design a to deal with today’s evolving risks.
product and then try to find a problem. That’s
why, for our latest solution, we sat down with
underwriters and designed our Underwriting
workbench with their input throughout the
entire product development cycle.
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MONTE CARLO 2019
ROUND-UP
2019
HURRICANE DORIAN
One of the main talking points in the As it happened, the market was spared heavy
run-up to Monte Carlo this year was Dorian losses as the storm, which had stalled
Hurricane Dorian, which on the eve over the Bahamas as a category 5 hurricane
of the Rendez-Vous was threatening for more than 24 hours, causing widespread
to barrel into Florida as a possible devastation to parts of the islands, changed
category 5 storm. its track and veered northwards, skirting the
Floridian coast and eventually tailing into
The market was understandably extremely the Carolina.
nervous given that on its original forecast
track, comparisons were being made with Two significant announcements with regard
1992’s Hurricane Andrew – a market-turning to Dorian were put out on the Tuesday of
event and one which effectively kick-started the Rendez-Vous. Risk modelling firm RMS
the development of the Bermudian reinsurance estimated that insured losses to the Caribbean
market. As such, observers were expecting a from Hurricane Dorian will be between $3.5bn
possible industry loss between $70bn–$100bn, and $6.5bn.
which by anyone’s reckoning would be a
RMS said that nearly all of the Caribbean
significant hit to reinsurers after two years of
insured losses will come from the Bahamas,
heavy catastrophe losses in 2017 and 2018,
particularly Grand Bahama and Abaco Islands.
with loss creep from these years a notable
It added that the loss estimate reflects
feature of recent Q2 reporting.
property damage and business interruption
caused by wind and storm surge-driven coastal
flooding to residential, commercial, industrial,
marine and automobile lines of business, plus
factors for both post-event loss amplification
and non-modelled losses.
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MONTE CARLO 2019
Risk modelling firm RMS
estimated that insured losses to
the Caribbean from Hurricane
Dorian will be between
$3.5bn and
$6.5bn
Not to be outdone, modelling firm Karen Clark In its release, KCC highlighted Dorian’s peak
& Company (KCC) also released its assessment intensity of 185 mph while over the Bahamas,
on the Tuesday of the Rendez-Vous, also one of only four storms in the Atlantic basin
suggesting the bulk of the losses from Dorian since 1900 to reach this intensity. However, it
are expected to come from the Bahamas, with noted that with Dorian remaining offshore for
an estimated $3.62bn hit from the devastation much of its track up the Eastern Seaboard of
on Abaco Island and Grand Bahama as the the US, the weak side of the storm impacted
storm stalled at Category 5 strength. the US coastline, limiting damaging winds.
KCC said it expects the US impact of the The storm made US landfall in Cape Hatteras,
hurricane to be in the $1.5bn range, with wind North Carolina, with wind speeds of 90mph.
damage concentrated in North and South Peak storm surge was in Cape Hatteras at
Carolina, which experienced the most of around seven feet, while other areas along
Dorian’s hurricane force winds, with insured the coast, such as Charleston, South Carolina,
losses from Puerto Rico and the US Virgin experienced two to three feet of storm surge.
Islands $23mn and $84mn respectively.
KCC said its industry loss estimate for the
US includes privately insured wind and storm
surge damage to residential, commercial, and
industrial properties and automobiles, but
does not include NFIP losses. The estimates
for the Caribbean include insured losses
to commercial, residential, and industrial
properties and do not include automobiles.
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MONTE CARLO 2019
CARRIER EXPANSION: CONVEX
Of course, one of the biggest stories of the at Monte Carlo this year, Convex announced
year has been the arrival of significant new that it anticipates its excess and surplus lines
capacity into the market, most notably in (E&S) platform could be live by 1 October. On
the form of Convex, the $1.8bn specialty the capacity side, it was reported that Convex
(re)insurer launched by industry entrepreneurs expects to make further raises in its first two
and market veterans Stephen Catlin and Paul to three years to take total equity invested to
Brand. The pair have not been slow to hire $3bn. Convex, with investment from Canadian
a raft of new talent this year, and it is widely private equity heavyweight Onex Partners,
expected – given the experience and pedigree launched in April this year supporting two
of hires they have made so far this year – they operating subsidiaries in the UK and Bermuda
will be writing significant lead lines across and is rated A- (Excellent) by AM Best.
their markets. Maintaining the momentum
BROKER EXPANSION: MCGILL AND AFL
Never ones to stay in the shadows at Monte Elsewhere, AFL Sud America, the recently
Carlo, we were expecting some substantive launched joint venture between AFL Insurance
announcements from the broking houses, and Brokers and Special Division Reinsurance
we were not disappointed. Brokers, announced on the Monday of the
Rendez-Vous that is planning to expand its
Nascent broker McGill & Partners revealed operations with the opening of a Chilean
on the Monday that it has hired former JLT operation in 2019.
property head Chris Stevenson to head its P&C
division. Stevenson resigned from JLT earlier Headquartered in Buenos Aires, Argentina,
this year, and will join the new broker once his AFL Sud America was formed in 2018 after
notice period expires. AFL acquired an equity stake in the former
Cooper Gay Argentina LLC business, which
Stevenson will be one of McGill & Partners’ was owned by Special Division – one of the
seven business heads. As such he will be largest reinsurance brokers in South America
joining a number of other well-regarded led by market veteran Guillermo Pastore.
industry names who McGill has persuaded
to come on board this year, including Tim AFL already has an operation in South America
Fillingham from Starstone as head of energy; in Sao Paulo, Brazil, and the Chilean operation
Joe Trotti from JLT as head of aviation; will specialise in agricultural business, as well as
and Brian Kirwan from Allianz as head of motor and other liability lines.
structured solutions.
It was reported that the business units are
likely to expand beyond the initial seven to ten
or twelve next year as the start-up builds on
its ambition of being an alternative distribution
channel for major corporate business.
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MONTE CARLO 2019
FACILITISATION: RKH
It would hardly be Monte Carlo without some Underwriters who participate on the Rethink
meaningful news relating to the grand dame platform write all qualifying business at a
of Lime Street, and we were not disappointed. predetermined level. They support the lead
On the Sunday of the Rendez-Vous, it was quoting underwriter and the system has five
reported that Hyperion Group’s specialty years of loss data powered by Hyperion X’s
broker RKH is set to introduce a significant so-called Accelerator platform. Insurers are
new facility into Lloyd’s called ‘Rethink’. understood to benefit through a reduction in
premium. Participating carriers will also have
Rethink will be officially launched later this access to a portal showing gross and net loss
year with four classes all led by AXA XL’s exposures, premiums written and losses as
Syndicate 2001. they occur on all bound risks.
The facility will begin in Q4 this year with four
non-marine classes – financial lines, terrorism,
A&H, and healthcare – all led by AXA XL.
LEGACY DEALS: ARGO
This year’s Monte Carlo was not all about the that the book in question could be a US
live market, however, with Bermudian (re) casualty market one, with up to $400mn in
insurer Argo Group International Holdings prior year liabilities. According to CEO Mark
revealing that it is working with broker Willis Watson, the carrier had been working on a
Re and the group’s capital markets and review of its back book for some time, having
advisory arm on a potential run-off deal. started a review of its legacy business at the
Although Argo itself was not talking numbers, end of 2018.
according to press speculation it is understood
10 RENDEZ-VOUS DE SEPTEMBRE
MONTE CARLO 2019
THE FUTURE AT LLOYD’S
The ‘Future at Lloyd’s’ report received Specific details of the execution plan for
extensive press coverage at this year’s event, Lloyd’s strategic overhaul became clearer at
offering a bold footprint for a complex change the Rendez-Vous, with reports that the initial
encompassing culture, process and structures focus will be on claims processing, the Lloyd’s
that Lloyd’s CEO John Neal has claimed will Risk Exchange and the complex risk platform.
spur innovation in response to customer needs. However, work is also understood to have
begun in earnest on the syndicate in a box
According to the Future at Lloyd’s prospectus, (SIAB) framework.
today’s rapidly evolving risk landscape makes
it difficult for businesses to track and make It was also widely reported that Lloyd’s is
decisions about their risk exposures. As such understood to be targeting a phased execution
it anticipates six key areas of reform: of the strategy. As such, the forthcoming
blueprint is expected to outline a roadmap for
• A platform for complex risk that makes ‘phase one’, or what can be delivered in the
doing business easier and enables efficient next 12 months.
digital placement of the most difficult-to-
cover risks. Reported reactions to Lloyd’s ambitious plans
were broadly positive. Indeed, Aon’s UK CEO
• Lloyd’s Risk Exchange through which less Nick Frankland said John Neal’s ambitious
complex risks can be placed in minutes at six-point turnaround strategy to cut costs
a fraction of today’s costs. and modernise processes at Lloyd’s could
allow it to re-emerge as the “dominant market
• Flexible capital that can simply and in the world”.
effectively access a diverse set of insurance
risks on the Lloyd’s platform. “We are massively invested in the Lloyd’s
market,” Frankland told The Insurer “Our belief
• A Syndicate-in-a-Box, which offers a is that the plan put forward by John Neal
streamlined opportunity for innovators
will do just that – to recreate a compelling
to bring new products and business into
marketplace that allows for more efficient
the market.
trading and higher quality underwriting.”
• A next generation claims service that Frankland also described Lloyd’s as a
improves customer experience and
“bellwether” for the global insurance industry.
increases trust in the market by speeding
“When it operates well it attracts business
up claims payments.
from around the world,” he said, pointing to
the proposed flexibility around the liquidity
• An ecosystem of services that helps all of capital and ease of business planning
market participants develop new business
and provide outstanding service to their management as being “intriguing… all of that
customers. can allow Lloyd’s to re-emerge as the dominant
market in the world”.RENDEZ-VOUS DE SEPTEMBRE 11
MONTE CARLO 2019
ILS SUPPORT
At this year’s Rendez-Vous it was reported Meanwhile, it was interesting to learn that
that Lloyd’s believes introducing a one-year Leadenhall Capital is in talks with Lloyd’s
investment horizon will be a quick win to boost about new entry routes to the Corporation
ILS participation, but has backed away from for open-ended ILS funds. Leadenhall CEO
the idea of launching a market tracker itself. Luca Albertini said that the proposals it
had submitted were not a straightforward
Indeed, John Neal highlighted the idea of example of a “syndicate in a box” or “follow-
a syndicate in a box as an approach that form” syndicates that Lloyd’s discussed in its
could work well for ILS firms. However, he strategic proposals revealed earlier this year.
suggested that anyone who would like to see
a duplication of Bermuda ILS systems would
be disappointed, due to the need to follow UK
legislative process.
REINSURANCE MARKET CONDITIONS
One of the most important recurring subjects AXA XL CEO Greg Hendrick, meanwhile,
at every Monte Carlo Rendez-Vous is the topic said the phenomenon being seen in the
of rates: are we up, are we down, and is the current pricing market is rare, noting that
reinsurance tail wagging the dog or vice versa? insurance rate increases are accelerating
It’s fair to say that the general consensus this towards double digits, and the retro market
year was that reinsurance pricing looks set to was up between 10–20 percent at 1 June. But
be stable to steadily improving as we head mid-year reinsurance pricing improvements
toward 1 January, but will continue to lag the were not as significant.
primary and retro markets.
Munich Re said is expecting to see further
Don’t expect miracles, though. According to stabilisation and price increases in the
The Insurance Insider, the lack of reinsurance reinsurance market, according to Torsten
capital depletion or major remediation Jeworrek, a member of the company’s board
exercises, along with rising capital as bond of management.
yields fall and the challenges of pushing price
on diversifying risks, point to a likely failure to Speaking at a briefing, Jeworrek said that the
obtain meaningful across-the-board rate rises. reinsurance industry had seen “a worldwide
stabilisation of rates” in 2019.
The issue of divergent pricing was keenly
discussed. As TigerRisk’s CEO Rod Fox pointed Additionally, significant price increases were
out, normally reinsurance creates hard markets, observed in some regions, particularly in Asia,
but this has not been the case this time, with the Caribbean and the US, which Jeworrek
increased demand for reinsurance, and markets considers to be a direct reaction and response
asking for increased reinsurance prices but to the large catastrophe losses experienced by
finding a degree of kickback from buyers. reinsurers in 2017 and 2018.
According to Liberty Mutual Global Risk “However, that’s not the full story,” he explained.
Solutions CUO James Slaughter, in the past the “We also saw for the first time now very good
connection between the insurance price and and mentionable rate increases on the primary
the reinsurance price was absolute, but that is side. This is a new picture, I would say.”
not necessarily the case at the moment.
Munich Re saw rate increases mainly in the
Indeed, he went as far to say Liberty buys US across many of business, Jeworrek said, as
reinsurance at an explicit price for its needs, well as in global specialty lines such as marine,
but that this price bears no relation to aviation and space.
underlying underwriting pricing on insurance.
“These global lines suffered individually large
losses and these prices now are a consequence
of this performance,” he noted.12 RENDEZ-VOUS DE SEPTEMBRE
MONTE CARLO 2019
CYBER GROWTH
Cyber was unsurprisingly a significant area On the Tuesday of the Rendez-Vous, Aon
of discussion this year, given the scale and unveiled research, conducted by CyberSecurity
frequency of continuing cyber attacks which Ventures, which forecast that cyber security
continue to hit the headlines, a series of spending is set to exceed $1 trillion cumulative
attacks on prominent companies recently, in the five-year period leading up to 2021.
including British Airways, real estate insurer
First American, Capital One and the Marriott Aon noted that cyber losses can affect
hotel group all falling victim to cyber criminals. businesses in the form of immediate crisis
expenses, as well as regulatory fines and
Given this context it should come as no lost revenue due to disruption of trading
surprise that the cyber market continues to or core operations.
show no signs of slowing down. Speaking
during the same press conference at the Monte Additionally, while the immediate financial costs
Carlo Rendez-Vous, Jeworrek highlighted of a cyber attack can be crippling for a business,
figures that show global cyber (re)insurance Aon believes that damage to reputation can be
premium will amount to almost $7bn come of equal or even greater concern.
the end of 2019. That figure is set to rise to
The reputational crisis resulting from an
almost $9bn in 2020.
attack can erode a company’s market value,
“[Our] growth expectation in the cyber destroy brand loyalty, limit companies’ digital
insurance market is unchanged,” Jeworrek transformation efforts and even lead to a
said. “We still expect this exponential growth credit-rating downgrade, the broker argued.
of 25–30 per cent every year.”
“Some companies still don’t fully understand
the impact a cyber attack can have on a
business,” said Onno Janssen, CEO, Risk
Consulting & Cyber Solutions EMEA at Aon.
“Understanding the worst-case scenarios
and their impact to a business is crucial
to developing an effective resilience
strategy in which cyber is managed as
an enterprise-wide risk across the entire
organisation,” he explained.RENDEZ-VOUS DE SEPTEMBRE 13
MONTE CARLO 2019
PREPARING
TO ADAPT
JOHN RACHER
UK OPERATIONS AND INTERNATIONAL
GROWTH AT ADVANTAGEGO
During the course of the Rendez-Vous – on a
rare rain and windswept day for the principality
– The Insurer caught up with our very own
Vice President and Head of Operations John
Racher to discuss the adoption of technology
by reinsurers and how they might be best able
to make use of the better data and insights
available to them.
“Reinsurers’ adoption of technology remains a
key focus in the market. I think that operational
efficiency, driven through technology is going
to be a key part of technology adoption during
the course of the next few years,” he said, “and VIEW THE FULL INTERVIEW HERE
I think that (re)insurers that do not make use of
that will not progress as well as others that do.
“It’s fair to say that technology itself is going
to continue to improve and accelerate and the
data and technology that is available will be
best used by those carriers that are prepared
to adopt that technology,” Racher added.
THE INTERVIEW
SURGICAL EFFICIENCY
Why does the reinsurance market What about the recent start-ups
receive such a bad press regarding its coming to market: how important will
take-up of technology? technology be for them?
I think that it’s actually more straightforward One of the main advantages for any start-up
for insurers in the primary market to take up is that they will not have concerns over legacy
technology as the solutions available are more systems, which has been a real issue for a
geared towards direct insurance, but perhaps number of established players in the market.
reinsurance technology is a little bit behind
the curve here. One of the biggest areas for Start-ups can hit the ground running with the
growth is the ability for reinsurers to analyse very latest technology, but they do need to
and derive value from massive data sets, which consider the initial set-up cost. Time to get up
has come on hugely in the past few years. This and running is also an important consideration
is an area we have been focusing on with our – we can provide solutions out of the box,
Exact Max solution. which is hugely beneficial for any start-up, and,
in fact, we can deploy a fully compliant Lloyd’s
policy administration system in just ten weeks.14 RENDEZ-VOUS DE SEPTEMBRE
MONTE CARLO 2019
How important is it for reinsurers What role can the take-up of
to be fast and nimble with regard technology have on improving loss
to technology? ratios within P&C?
The pace of technology is not going to slow, There are many factors to consider when
and those carriers that invest in technology talking about improving loss ratios and
solutions to improve the efficiency of their technology is certainly one. Underwriting
processes will undoubtedly benefit. Those excellence remains a focus, and we see a drive
that don’t will be left behind. from underwriters for more decision support
and contextualised information supporting
We are not seeing a drive in the market for data-driven underwriting.
technology heart and lung transplants, but
we are seeing a drive for operations that One thing I would stress here is that providing
add to the existing ecosystem: less costly, information to underwriters in a digestible
lower risk solutions that deliver the biggest format is key; an underwriter does not want
business benefits. In a sense, we’re looking at to wade through 50 pages of statistics.
nimble keyhole surgery rather than open-heart
surgery. So we’re seeing increased interest in Similarly, what role can technology play
solutions that address areas such as exposure in driving down expense ratios?
management, underwriting workbench and
discrete microservices such as sanctions Again, an important focus area for the market
checks triggered in real-time during the and particularly at Lloyd’s where John Neal
underwriting process. Essentially, technology recently commented that he wants to drive the
should be a business enabler, not an inhibitor, expense ratio at Lloyd’s down by ten points,
that doesn’t require a complete system and technology can clearly play a pivotal role
transformation to do that. here. In fact, the six initiatives proposed by
Lloyd’s are all driven by technology, and that
Is the market really in better shape drive for efficiency will allow underwriters to
regarding how efficient it is than it was focus on what they are good at: underwriting.
compared to recent years?
It probably is although that is hard to measure.
We have seen some adoption of technology
which is making the market more efficient,
including, for example, the uptake of PPL in the
London Market, which is really gaining traction.
The market has now bound over 250,000 risks
using the platform, which is pretty impressive.THE WORKBENCH DESIGNED FOR UNDERWRITING EXCELLENCE Underwriting is AdvantageGo’s powerful new workbench solution, enabling underwriters to… Create standardised and consistent underwriter Quickly spot new and emerging markets, cross- journeys while managing underwriting teams to selling opportunities as well as considering new drive discipline and excellence business models Rapidly analyse renewals, old and new Efficiently manage pipeline and business plans submissions to visualise business targets against with the ability to quote accurately and quickly actuals Maintain and build new relationships through Forecast effectively, assess the marginal impact ‘Know Your Customer’ analysis to improve of new portfolio quotes, including identifying renewal rates gaps and how to close them TO REVOLUTIONISE THE WAY YOUR BUSINESS RESPONDS TO SHIFTING MARKET NEEDS, VISIT WWW.ADVANTAGEGO.COM/UNDERWRITING TODAY.
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