Overview of the 10th IF Seminar — Today’s Issues and Opportunities

No. 15 , February 2015 Overview of the 10th IF Seminar? Today?s Issues and Opportunities By Etti Baranoff+ The 10 th Insurance and Finance (IF) Seminar was hosted by Prudential plc on 4 November 2014. The main topics discussed were the challenges faced by the industry such as low interest rates, alternative capital, regulatory risks, creditors? risks, longevity risks, climate risks and more. Against this backdrop of challenges, the participating CEOs, CFOs, CIOs, CROs, chief economists and outside speakers provided ideas of opportunities for growth. The main features were creativity, innovation, use of technology and benchmarking on the industry?s expertise in handling risks. 1 A fter welcoming remarks by Anna Maria D?Hulster, Secretary General, The Geneva Association and Nic Nicandrou, CFO, Prudential plc, Mike McGavick, CEO, XL Group and Chairman of The Geneva Association, provided a powerful keynote speech delineating the main i ssues and opportunities of the insurance industry. His keynote presentation is provided in this newsletter as a guest editorial on page 2. McGavick?s address on the issues continued during the CEOs? panel that was led by Geoffrey Bell, Executive Secretary, Group of Thirty. The panel included ?in addition to McGavick ?Nikolaus von Bomhard, Chairman of the Board of Management, Munich Reinsurance Company, and Michael Butt, Chairman of AXIS Capital Holdings Ltd. Summarising briefly McGavick?s presentation, which centred around the financial sector?s challenges and opportunities in general such as technology, climate risk and longevity risks. He provided a drill down into the challenges unique to insurers: globalisation vs national regulation, the rise of alternati ve capital, consolidation of brokers, big data and analytics, and regulations. The unique challenges for the insurance industry require bigger innovation and encourage and trigger consolidation. As noted in the article, the opportunities lead to innovation in product development and efficient reliance on experts. The discussion of the industry?s fundamental rethinking about its role in society flowed into the CEOs? panel discussion. Continuing the keynote speech, Nikolaus von Bomhard added his perspective regarding issues on the asset side of insurers as relevant investors. He noted that a different challenge is the lack of protection of investors, since ?everything is done to protect the debtor, but not to support the creditor these days ?rules have changed and tax systems are changed?. There is an extraterritorial reach ?national governments stretch their reach. These issues complicate the operations of insurers. In addition, he discussed the ?re -assessment of behaviour with the benefits of hindsight? in orde r to prevent the next crisis is a complex challenge for insurers. Michael Butt added that ?finding areas of growth is difficult and giving the shareholders proper return is tough?. He believed that a normalisation of interest rates would be helpful. In the area of alternative capital, he expressed concerns about ?too much supply against the current demand.? Butt emphasised long -term vs short -term capital; economic losses vs insured loss and the fact that only 30 per cent of the losses are insured in the dev eloping world. Even in the U.S., the losses from Sandy were not fully insured; when there is no insurance, coverage is provided by governments. + Research Director, Insurance and Finance, The Geneva Association. 1 The one -day seminar included three keynote addresses and three panels beginning with the view from the CEOs ? perspective, followed by more technical views of CROs and CFOs . The afternoon was devoted to views from outside beginning with the intriguing keynote speech by Davide Serra and concluding with a panel of outside experts.