The latest report from the Bermuda ILS Convergence 2014 conference is that true innovation in the market has not been on the product side but around the deployment of capital.
That was the view of a panel discussing product innovation at the PwC/S&P Bermuda Reinsurance 2014 conference in Hamilton.
“Innovation tends to occur in moments where entities or the markets are under pressure – and innovation pressure in the market is going to continue,” said Tom Hulst, chief executive officer (CEO) for Ariel Re.
Kathleen Reardon, CEO of Hamilton Re, agreed that innovation is being seen in the deployment of capital, for example through sidecars and cat bonds. She emphasised that a key aspect of these that is sometimes overlooked is that the point is to pass the savings on to the client.
“It’s not so much innovation as evolution,” added Charles Cooper, president and chief underwriting officer for XL Re. “There has been a lot of innovation in creating vehicles and structures.”
Reardon added that the industry is on the cusp of further change, with more innovations to come.
Hulst said that the market presents increasing choice for ceding companies, and that there is increased demand for the ability to be a constructive partner in taking on risk.
“I think clients still value relationship, service, the value that you are adding,” added Reardon. “It’s not so much size that matters, it’s quality over quantity. I think this has always happened – it’s just more prominent now.”
Asked about the opportunities presented by the current market, she highlighted the potential for harnessing technology.
“We’re living in a digital world and that’s an easy place to start to streamline and save some costs. We can then reduce expenses and if we reduce the pricing side we can get to answers on those emerging risks such as cyber more quickly.”
Cooper added that underinsurance is a huge opportunity for the whole industry. “The emerging markets are part of the answer but there’s a huge gap, a huge opportunity for penetration rates to grow even in the developed markets. There’s a real opportunity there for all of us to educate: insurance companies have done a poor job educating people on the value of the product.”
When it comes to growth into emerging markets, Hukst emphasizes the importance of inside knowledge.
“With the right partner, emerging markets become an interesting thing to start exploring but you need to have an understanding of what’s happening in those markets and how the culture works,” he said.
ILS, Bermuda ILS Convergence 2014, Bermuda, PwC, S&P, Bermuda Reinsurance 2014, Reinsurance, Tom Hulst, Kathleen Reardon, Charles Cooper