Oct 2020

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The future of insurance

Source: Middle East Insurance Review | Aug 2020

The sector should take the creativity and collaboration that have characterised the industry response to the crisis to keep on driving the development of new products and new ways of delivering service.
Sonja Rottiers, CEO, Lloyd’s Brussels & Regional Director for Lloyd’s EMEA
When I assumed the role of regional director Lloyd’s EMEA and CEO of Lloyd’s Insurance Company SA (LIC) in January 2019, I faced a very different kind of challenge. Lloyd’s had created a European platform in Brussels, which involved an almost unimaginable degree of complexity: teams in London, Brussels and across Europe collaborating at pace from regulatory, compliance, legal, operational, logistical, and every other possible area of business to ensure that Lloyd’s could continue to service its European customers.
Little did I realise then that in 2020 we would all be wrestling with an even more complex event of an entirely different nature – a pandemic which would not only hit communities, businesses and economies worldwide at the same point in time, but that as a global human and economic catastrophe it would present even more short-, medium- and long-term challenges than anything we had experienced before.
Lloyd’s latest numbers show that COVID-19 will cause the biggest insured loss in history across the industry, totalling $203bn. That includes underwriting losses projected to reach $107bn and, unlike any other event, falls in industry investment portfolios of around $96bn. Lloyd’s itself will be paying its customer around the world an estimated $3bn to $4.3bn, on par with some of the biggest catastrophe years on record. However, we were able to provide the confidence to our regulators and rating agencies that the market is well-capitalised and is already responding to the crisis. 
Hit the ground running 
Over the last few months, we may have had to make some serious readjustments and accelerate some areas of our work culture and behaviours, but I am in no doubt that the industry in the region has out-performed even our most optimistic expectations and, I firmly believe, those of our customers.
The Lloyd’s market underwriters and brokers moved very quickly to flexible and home-working protocols and even though we are so closely associated with the face-to-face trading environment, our technology has stood up well. Brokers and underwriters have been trading successfully using online placing platforms, such as PPL to ensure that all-important continuity of service for our customers.
The crisis has also demonstrated that Lloyd’s strategy – The Future at Lloyd’s – truly embodies the future of insurance, its ambition and potential. We must be more customer-centric, and we must harness the technical expertise that the industry has and fuse it with the innovative approaches and ideas that proven startups and InsurTechs can bring.
Concerted effort 
The other question that we as an industry need to address is scale. The magnitude of the pandemic’s financial and social impacts has exposed the shortcomings of society’s preparedness for, and resilience to, systemic catastrophic events of this scale and nature. The response to COVID-19 will require government and industry to join efforts to support all of those businesses and people who have been hardest hit. 
And to give a clearer picture of the scale I’m referring to, the global non-life reinsurance industry has an estimated asset pool of some $2tn. As of May 2020, global government fiscal support packages in response to the pandemic totalled $9tn, according to the IMF, which could increase up to $15tn by the end of 2020.
Lloyd’s is uniquely positioned to address this challenge by virtue of our being a marketplace and a convenor of the industry, combined with the strength of our brand. We must bring industry, governments, technical experts, academia and other key stakeholders together to work at a larger scale than ever before. The constructive role played by regulators across the region to support and encourage the market in its efforts to serve customers has been absolutely pivotal.  
Lloyd’s purpose, ‘Sharing risk to create a braver world’, encapsulates this approach and we have published a report, ‘Supporting global recovery and resilience for customers and economies’, which proposes a series of open-source frameworks for application around the world: ReStart, Recover Re, and Black Swan Re. These are solutions to support the reopening of businesses against the threat of further waves of COVID-19, building greater resilience across global supply chains as well as the digital economy, and preparation and protection for the next systemic catastrophic event.
And we must also support the industry in developing the knowledge, skills and technology to mitigate the impacts to society of future systemic risks. So in addition to the three frameworks, Lloyd’s is developing a Centre of Excellence supported by up to £15m in seed capital investment. 
To kickstart the creation of the Centre of Excellence, Lloyd’s Innovation Lab is already working with InsurTechs that can provide some of these capabilities, including exploring the application of an epidemic tracker to better evaluate and underwrite pandemic risk, as well as solutions to help close the insurance gap for systemic risks.
Culture – the foundation of success 
And it is not just product and technology that is key to making a tangible difference. Culture is the foundation on which companies and business are built, and I believe that a diverse and inclusive workplace where everyone feels represented, respected and valued brings out the best of individuals, teams and the business as a whole.
The insurance industry is global. We all come from different backgrounds, and bring different perspectives and life experiences to the work we do. Too often in the insurance sector though, we can be drawn into working in silos, perhaps due to our background as a highly technical, financial product-driven business and not being as joined-up and open as we perhaps should be.
We will emerge from the pandemic, having broken down some of the established barriers for our businesses, but how can we ensure that those silos aren’t re-built in the new normal?  I have had the unique opportunity to do this in a newly created insurance company, and I wanted to share what works for us.
Diversity is a key component. We all approach issues from different angles, and diversity is something which should be embraced. In fact, I have spent much of my career fighting for exactly this with Women on Board, an organisation that I founded to ensure that boardrooms are more diverse, as well as in my roles as CFO and CEO. 
At Lloyd’s, one of our three key priorities – alongside with strategy and performance – is culture. We want to create an inclusive culture where everyone is respected and valued. Ultimately, as leaders, I think we must always keep in mind that in order to succeed, it is people that make the difference (not products, not data, but people). By ensuring that a team is diverse and works behind a bigger purpose, we will help bring those silos down. 
Drawing on global resources
Lloyd’s Dubai, as an integral and leading player in the Middle East will draw on the global resources of Lloyd’s to help the regional insurance industry find its way through the different market that awaits us. Insurance is all about being there for our customers when they most need us, and that is likely to mean when they most want an empathetic human interaction. 
No one knows exactly what the market is going to look like when we get past the immediate impact of COVID-19, except that there is consensus that it certainly is not going to go back to what it was. So, we should be looking to take the creativity and collaboration that have characterised the industry response to the crisis to keep on driving the development of new products and, especially, new ways of delivering service. 
Lloyd’s, as a global brand and thought leader, has a key role to play in this. Throughout our more than 300-year history, we have weathered many global crises, and have always been at the forefront of the industry response. As we have done in the past, we will draw on our global experience, expertise and knowledge to work in new ways with industry, government and society in order to provide protection and confidence.
I’m optimistic that a different type of insurance industry will emerge – one that is both more efficient and more customer focused. Lloyd’s as a global (re)insurance leader, and Lloyd’s Dubai as a regional insurance leader, in charge of the Middle East region and Turkey, are fully committed to working with our business partners toward making that potential a reality. M 
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