Welcome to iLeads Insurance Market Minute, where we bring you the latest, most relevant news regarding the insurance market. Last week you were reading Most Commercial Lines Continuing to Win Healthy Price Increases. This week we’re bringing you:
Engineering the right technology to enhance client experience*
Imagine if all insurance companies operated like banks, with a seamless experience for brokers, underwriters, and insureds collaborating on complex transactions in real time. With the right experts, technology, and system integrations, the industry could redefine itself.
“I was part of the original team that came together to build Resilience,” said Matt Hall, co-founder, and VP of labs at Resilience. “We were a group of tech-minded folks, namely cybersecurity experts, concerned about the under-preparedness of today’s insureds in the face of an increasingly menacing threat landscape.”
This was the foundation for Resilience’s “Insure and Secure” approach, which enables the organization to give customers comprehensive risk assessments, cybersecurity consulting, and proprietary solutions for improving security posture.
“As we built the company from the ground up, we recognized a unique opportunity. With nearly half our staff coming from an engineering background, we looked for smarter, leaner ways to do things,” Hall explained.
Technology has revolutionized so many industries, so why not insurance?
Many of the traditional insurance companies are still built on legacy systems or have attempted to create decentralized compartments which evidently led to inefficiencies. Consolidating technology and data will allow the industry to propel into the age of digital innovation.
Insurer M&A activity surging: Deloitte*
Insurance merger and acquisition activity continues to accelerate for most sectors in 2021, with the number of deals increasing 18% year-to-date, according to a report released Monday by Deloitte Consulting LLP.
Lower interest rates continue to create opportunities around debt financing as predicted and “are here for the taking when it comes to insurance M&A,” Deloitte said in the mid-year outlook.
Broker transactions continue to remain strong in terms of average deal size and number of deals, according to the update.
Almost 60% of brokerage deal volume in the first half of 2021 was driven by private equity investors and private equity-backed aggregator platforms, Deloitte said.
However, property/casualty deals are down, with 18 deals year-to-date, versus 24 in the same period of 2020. This is likely due to the current rate-hardening environment more than any other factor, Deloitte said.
Life and annuity deals also increased from five to 17 year-to-date, it said.
Aggregate deal value is about four times higher than in the first half of 2020 and full calendar year 2020, driven by some large deals, Deloitte said. Average deal value year-to-date is also higher than 2020, it said.
Pricing Trends Are Helping Reinsurers Counter Major Claims Uncertainties*
A principal negative factor affecting the reinsurance industry is the large amount of claims uncertainty, but positive tailwinds are offsetting these negative headwinds, creating a stable outlook for the sector into 2022, according to Carlos Wong-Fupuy, senior director, AM Best.
Wong-Fupuy pointed first to COVID-19, where a high proportion of incurred-but-not-reported (IBNR) claims will take several years to develop. Other claims uncertainties are related to extreme weather events, such as the Texas freeze (in the first quarter of this year) and, more recently, the European floods, as well as the higher incidence of secondary perils, which are less well understood and more difficult to price and to model, he explained.
And, last but not least, another cause of claims uncertainty is the persistent trend of social inflation, which is affecting U.S. casualty lines, he continued.
Wong-Fupuy spoke during a recent AM Best panel discussion on the global reinsurance market, along with Juan Andrade, CEO, Everest Re Group; Kathleen Reardon, CEO, Hiscox Re & ILS, and Stefan Holzberger, AM Best’s chief rating officer, who was the moderator.
However, Wong-Fupuy said, the good news is that this environment of higher uncertainty has driven better underwriting discipline and improved pricing trends.
“We have seen several companies actually improving, across the board, their performance on an underlying basis,” once the impact of COVID-19 is excluded, he said.
Holzberger asked Andrade at Everest Re if he felt optimistic about the pricing environment and earnings expectations for reinsurers over the near term?
“I am optimistic about what I see today in the marketplace, and I see that continuing into 2022,” said Andrade, noting that the industry is very well capitalized, assisted by the formation of new companies.
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