Fiscal pressure on governments could be one of re/insurance’s biggest opportunities, Willis Re International chairman James Vickers told DWIC 19 in Dubai
Governments are not accustomed to buying insurance, but they need the sector more than ever, Willis Re International chairman James Vickers told delegates at the Dubai World Insurance Congress 2019 (DWIC).
Governments’ financial resources as the “lender of last resort” are stressed, he emphasised, particularly since the global financial crisis and against looming future crises, most notably global warming.
There is a clear recognition at government levels that 70% of economic losses from natural hazards are uninsured, Vickers suggested. He described climate risk as a “tail wind” that would steer governments towards exploring insurance as an alternative to government spending.
“They are looking for solutions,” Vickers told DWIC 2019.
Insuring gilts is a big public sector opportunity for insurers and reinsurers, Vickers emphasised.
“Governments are not used to buying insurance, but they’re pretty good at issuing government debt,” he said.
Putting an “insurance wrapper” around government bonds, backed up by insurance and reinsurance protection, would “free up the government to issue more debt”, Vickers explained.
“We have to develop solutions that are suitable for them and their different requirements,” he added.
In commercial lines, he stressed the switch towards intangible assets among the world’s biggest companies – led by technology firms since the Millennium.
Non-material damage business interruption is a big product opportunity, Vickers pinpointed.
“If you’re the CEO of Apple you’re worried about something – you may not know what – affecting your quarterly or annual earnings,” he said.
Speaking on “the demand challenge”, Vickers recalled previous market challenges, such as lack of available reinsurance capacity in the 1980s, versus the current challenge of over-capacity.
“Put simply, there’s too much money coming in, and we have to find a way to put it to use,” Vickers said.
Other parts of Vickers’s speech addressed the industry’s challenge to focus on new models of distribution, particularly to close the protection gap across emerging markets, for both commercial and personal lines.
This would be achieved via digital platforms, mobile phone-focused partnerships for developing markets, and partnering with brands with strong consumer resonance.
Addressing an audience in Dubai, he focused some comments on the Middle East and North Africa (MENA) countries.
He suggested that, given the right climate for innovation, insurance markets in MENA markets could even leapfrog their Western counterparts by having less legacy technology as obstacles to progress.
“MENA markets have less of the inertia of incumbency, that means change will be easier to achieve,” added Vickers.