Reinsurance high on the agenda at InsureTalk30

InsureTalk30 took place on Thursday, 23 March 2023, with a strong focus on reinsurance and catastrophe modelling.

Our accomplished host, Christelle Colman of Ami Underwriting Managers, set the scene perfectly by outlining the new CPD process for InsureTalk guests. The newly launched InsureTalk CPD hub allows webinar attendees to download and store their certificates month by month. Each session will earn you 2.5 CPD hours. Check out your latest certificates at www.insuretalk.co.za.

Your CPD certificate will still be sent via email within 14 days.

Our first speaker of the day, Willie van Graan, is the chief underwriter and reinsurance offer at Old Mutual Insure – our headline sponsor for the day. His topic covered the impact of reinsurance on the insurer and customer.

“Reinsurance helps us to diversify,” he said. “It helps us to keep the cost of insurance lower for the end user.”

He proceeded to share some of the key findings of the January 1 renewals.

“January 1 renewals reflected shifting market dynamics as reinsurers adjusted risk appetite and pricing thresholds for certain sectors in response to ongoing and emerging challenges.”

Property was the most challenged sector, he said.

“The imbalance of supply and demand in property catastrophe, particularly in North America, drove a stressed market and, in some cases, led to pricing and structural changes unsupported by technical considerations.”

He touched on reinsurers’ approach to the possibility of grid failure, which as we now know, is not to cover pooled risks for this eventuality.  

Underwriting requirements in other classes of business were widely varied.

Importantly, there was limited new capital inflow through the year-end process leading to 1 January as investors held back amid continued catastrophe loss, increasingly attractive risk-free rates of return, their own moderating assets under management and a desire to assess the degree of the market transition at 1 January. 

He unpacked issues around climate change, catastrophe losses, market conditions driven by macro influences, the contribution of secondary perils and unmodelled events, global large loss activity (with a focus on Hurricane Ian), catastrophe rate-on-line indices, reinsurers’ combined ratios and other topics.

Our next speakers, Stuart Green and Rasheed Ali of Old Mutual Insure, continued the theme of reinsurance on the insurer and the customer.

“Climate change and globalisation are changing the fundamentals of traditional insurance and (in brackets) reinsurance,” said Rasheed. “Climate change is obviously a significant impact – I don’t think any of us can deny that it’s happening.

“Due to the increase in frequency and severity of natural disasters, … reinsurers are experiencing a higher occurrence of cat losses.”

“What do we do in response?” Rasheed unpacked this question in detail in his presentation, touching on topics such as globalisation, cybercrime, inflation, AI and machine learning, grid collapse, the KZN floods, capital models, pricing and more.

“It’s a tough climate to operate in for insurers, reinsurers and customers,” he said. “At the end of the day, though, there is no substitute for sound underwriting.”

Stuart continued on the theme of reinsurance and how it impacts on consumers. His talk focused on the various models used by the industry to set rates. The first was catastrophe (cat) modelling.

“Catastrophe modelling is the science of making probabilistic predictions of financial risk due to natural and non-natural catastrophic events,” he said. “The basic coal is to predict future losses to property from catastrophic events, for individual properties, of different types and for portfolios of properties.

“Cat models are designed to answer where future events can occur, how big future events can be, expected frequency of events and potential damage and insured loss.”

Stuart went on to outline some examples of risk assessment, spelled out a few limitations of cat models and discussed reinsurance and pricing considerations as well as climate change risks.

Next up was IISA CEO Thokozile Mahlangu, who shared details on the upcoming African Insurance Exchange conference, which will be held at Sun City and online from 24 to 26 July. The theme for the conference is “Collaborate. Cultivate. Create.” Thokozile invited delegates to register for the conference at www.africaninsuranceexchange.com before sharing details on some of the topics that will be discussed at conference this year. One of these was the sustainability of the reinsurance market.

“After all the major catastrophes that have been taking place around the world, is the reinsurance market sustainable in its current form?” she asked.

Other topics that will be discussed are whether long-term digital transformation will continue into the future; the mental health scourge that was exacerbated by the Covid-19 pandemic; industry collaboration with government – particularly local government; a different angle on cyber risks; the opportunities brought about by ESG; wellbeing and WFH and revisiting retirement funding options.

“Another element that is quite critical is diversity, equity and inclusion. There is no doubt that a diverse team succeeds, that a diverse team delivers better – diversity brings great results. We are going to have a topic that will unpack that aspect as well.”

FA News’ Rianet Whitehead, who is also the founder of The Insurance Apprentice, gave a fascinating insight into the top stories in the industry right now. The headline story was about Chubb pulling its property and casualty business out of South Africa. We also heard about SA’s grey listing by the FATF and its impact on the local market.

Rianet reminded guests that they can rack up CPD hours by reading the magazine, either in print or digital format. Three hours are available per edition, with six editions being published per year. Remember, the end of the CPD cycle is 31 May. Rianet encouraged attendees to get their CPD sorted in good time.

The first episode of the new season of The Insurance Apprentice airs on 30 March 2023. Rianet thanked sponsors and unpacked some of the processes and prizes involved.

After some soothing entertainment it was back to business, with the next speaker, André Pienaar of F&I Re, covering the topic “Facultative reinsurance from a reinsurer’s perspective in the current market in South Africa.”

He outlined some of the conditions impacting on the property insurance and reinsurance markets as follows:

The double-double-half point refers to the expectation by the industry that we are facing double the rates, double the deductibles and half the capacity.

André shared his thoughts on the future of the industry:

He concluded by sharing his views on how long the hard market is going to last.

“I think it will teeter off in about two years’ time, as long as there aren’t any other major disasters. I don’t think it will ever go down again to pre-2017 levels. We’re likely to get a flat rate corrective market.”

If you missed the session you can view the YouTube recording below.

Don’t forget to register for InsureTalk31, which takes place on 20 April 2023 from 10am to 1pm.