Aon has interviewed the Co-Chief Executive Officer of Markel Corporation, Richie Whitt, as part of its Virtual Reinsurance Renewal Season fireside chats.
The goal of Aon’s fireside chats is to drive growth across the re/insurance industry in order to bring capital closer to clients’ needs and enable them to flourish in a stronger economy. The series discusses the challenges and opportunities facing major re/insurers and insurance buyers, sharing both perspectives.
Hosted by Andy Marcell, Chief Executive Officer of Aon’s Reinsurance Solutions, Whitt said that investing in digital capabilities would be “critical” to re/insurers, particularly when trying to secure small to medium-sized enterprise business.
“I am not sure a Fortune 500 company is going to go online and in 15 minutes or less complete their corporate insurance program. But a small business owner, they do not have time; they will want to go online and [complete a policy] fairly quickly, and we have to be able to respond to that need.”
He added that re/insurers had to “really sharpen-up” on their digital capabilities because “the digital natives are coming.”
“I am not suggesting we will ever get to an Amazon-like experience in an old-school industry like insurance, but we have to get a lot closer. And if we do not figure out how to do this within our industry, somebody from outside of our industry will help us with it and take a pretty meaningful piece of our market share while they do it.”
Whitt highlighted the importance of being able to match risk with capital, adding that, after a “tough” four years, insurance-linked securities (ILS) would continue to be a highly attractive risk transfer option and that he was “incredibly bullish” on the long-term prospects of ILS.
“I just believe ILS makes so much sense in the long run because catastrophe risk in particular belongs in the broader financial markets where it can be diversified,” he said.
Whitt acknowledged the existence of a “significant” protection gap, highlighting that while insurance was originally built around tangible assets, the enterprise value of many large companies was now based on intangible assets that required innovative insurance solutions – such as intellectual property cover.
Whitt said that Markel Corporation had become “acutely aware” of tail risk across its operations, and that the industry still needed to develop solutions to address the challenge of tail risk.
“The various capabilities that we have assembled have made [tail risk] more visible to us. And what it quickly pointed out to us is that not everybody thinks about tail risk the same way. And that the cost of tail risk is not well understood.”
In considering tail risk, Whitt added that the industry needed to take risks beyond the 1-in-250-year return period “more seriously”, while enabling price discovery for such events.
“It seems theoretical when you are talking about the 1-in-5,000 event or 1-in-10,000 event, but in my insurance career and reinsurance career, one thing is clear to me: if it can happen, it eventually will happen,” he said.