Re/insurance industry must embrace change to restore trust: PwC

Re/insurance companies must change their approach to business following the COVID-19 pandemic to help repair the social and economic damage it has exposed, according to Arthur Wightman, territory and insurance leader at PwC in Bermuda.

“Chief executive officers need to be prepared to steer their companies differently from how they were going into March,” said Wightman. He called on industry leaders to rethink the future, to embrace digital transition and to increase transparency for customers, investors and wider stakeholders, which he said “will be key to building trust in society.”

PwC has partnered with the Financial Times to assemble the PwC / FT Digital Dialogues series, called Emerging stronger: Growth and Resilience in Reinsurance. FT journalist Oliver Ralph interviewed a series of chief executives of insurance companies for the series, revealing concerns among industry leaders.

“There has been a need to repair balance sheets in response to COVID-19 claims and the impact of natural disasters,” said Wightman. “And while doing that CEOs have needed to think about the future at both a practical and conceptual level.”

The research revealed a number of social and economic concerns, including increasing wealth disparity and the erosion of the middle class and the pervasive nature of technology and its impact on individuals, society and the climate. Age demographics are putting increasing pressure on business, social institutions and economies, while there has also been a breakdown in global consensus with growing nationalism and populism, and declining confidence in the institutions that underpin society.

These problems have not been caused by the COVID-19 pandemic, but have been exacerbated by them, and the insurance industry is evaluating how it should respond to deliver growth and sustainability.

Wightman believes Bermuda can lead the industry, driven by a new generation of re/insurance startups.

“The value proposition of the island is sometimes called into question, however the capital markets tend to act as the ultimate arbiter and the island continues to show its resilience as well as its leadership position globally for reinsurance, ILS, life reinsurance and captives,” said WIghtman.

“There have been 51 new insurer registrations in Bermuda this year through October, and the Class of 2020 is well on the way to establishing itself – not something that people thought we’d see again since 2005/2006,” he said. “Bermuda has shown once again that it is the place to deploy capital efficiently and effectively and it is the place to innovate.” He noted that an estimated $12 billion to $15 billion of new capital has been deployed into the industry in recent months.

Wightman said the industry must seize opportunities for growth covering natural catastrophes, pandemic risk and cyber. “The industry is only offering a fraction of the coverage that it probably needs to cover a proper systemic event, which we haven’t seen yet,” he said.