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Allianz Partners, a major global insurance and assistance provider, has disclosed its financial outcomes for the year 2023, setting new records for revenue and operational profit.

Performance of Allianz Partners’ health segment

In the health business segment, revenues surged by 23.4% to reach 2.959 billion euros. This growth was propelled by organic expansion, increased engagement in the small and mid-size enterprise (SME) sector, and forging new alliances with local insurance entities.

A significant role in this growth was played by the enhancement of the digital health services through the Lumi health ecosystem, which served over a million users in the past year.

Performance of Allianz Partners’ travel insurance segment

The travel insurance division reported an 8.0% increase in revenues, totalling 3.297 billion euros. The resurgence of travel activities in the Asia-Pacific region, particularly following the lifting of travel restrictions in Australia and New Zealand, contributed to this rise.

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Additionally, sustained advancements in North America and Europe helped bolster the segment’s performance. The recent introduction of the allyz mobile app marked a significant stride in the company’s digital outreach.

Performance of Allianz Partners’ mobility and assistance segment

The mobility & assistance segment showed a revenue increase of 11.2%, amounting to 2.902 billion euros. This was led by the robust performance of the roadside assistance and home businesses across Europe and Latin America.

Despite stability in the mobile device and digital risk (MDDR) business, remarkable growth was noted in markets such as India, Spain, and France.

Allianz Partners businesses’ growth in 2023

CEO Tomas Kunzmann reflected on the year’s achievements, noting significant strides in all key business areas, including travel, health, assistance, and mobility services.

“2023 was another record year for Allianz Partners in terms of total revenues and profits, following the record results in 2022. The travel business continues to thrive, our healthcare business saw tremendous growth and there was excellent momentum in our assistance and mobility business globally. As a result, our continued growth is built on solid foundations as we invest in the digitalisation of our services while ensuring the human touch and the highest levels of customer satisfaction,” he said.

Allianz Partners’ performance forecast

Looking forward, Kunzmann remains optimistic about the company’s trajectory, attributing its strong position to the dedication of over 22,000 global employees. He emphasised the strategic goals set for 2030, aiming to double the company’s revenues through continuous innovation and a focus on digital enhancements.

“Thanks to the commitment of our team of more than 22,000 employees around the world, I am very positive about the outlook for the coming years and that we are on track to achieve our goal of doubling revenues by 2030,” he said.

Nearly four in 10 users of generative AI in the workplace say they are saving up to 10 hours a week, as a new report revealed the widespread use of the technology at work.

Contentful’s survey among 820 people across the world found that 37% of daily gen AI users are saving between five to 10 hours a week.

Another 38% reported saving between one to almost five hours of time at work thanks to gen AI tools, according to the report.

There are nine per cent who reported saving between 11 to 20 hours of work, while two per cent said they are able to save more than 20 hours.

The length of time saved also varied depending on roles, with more people in technical roles saving between five and 10 hours at work.

Employees in non-technical roles, on the other hand, are more likely to save between one to less than five hours.

Source: Contentful’s Generative AI Professional Usage and Perception Survey

“Gen AI is here to stay. It has the power to radically transform how we work together across teams and departments,” said Karthik Rau, CEO of Contentful, in a statement.

“By fostering a culture of knowledge and responsible usage, organisations can empower their workforce to harness the full capabilities of gen AI while unlocking the creativity of their teams.”

Access to generative AI

The time-saving benefits of gen AI at work come as more employers invest in such tools for their workforce, according to the report. It found that more than three-quarters of respondents have company-paid access to gen AI tools at work, with 61% of employees saying employer-provided access is “for the better.”

“Overall, most respondents view a potential employer’s decision to provide access to gen AI tools favourably in choosing whether or not to take a job, with far more ambivalence than any negative impact,” the report read.

Source: Contentful’s Generative AI Professional Usage and Perception Survey

According to the report, only 29% of the respondents said they have no interest or need for generative AI tools at work, citing concern or fears (13%), lack of knowledge (16%), and the lack of opportunity (11%).

Over two decades of serving the market have gifted the Bermuda-based reinsurance stalwart Sal Tucci (pictured) with a healthy respect for the ‘organised chaos’ that is how reinsurance brokers operate.

With credits to his name including time at Aon Re Services and Aspen, and having launched his own reinsurance brokerage Reinsurex in the early 2000s, the throughline of Tucci’s career to date has been his recognition that the key to creating innovative solutions in reinsurance is understanding the mind of the market. It was on this foundation he launched Jireh Holdings Ltd with the ambition of supporting clients with ILS risk transformation, fronting and advisory services.

Backing innovation in reinsurance broking

Almost a year to the day of its launch, the firm’s reinsurance broker platform Jireh Connect announced its first industry loss warranty (ILW) placement and, in conversation with Re-Insurance Business, Tucci noted that the positive reaction to the business reflects the appetite for innovation at the heart of the market. What Jireh is looking to do is help reinsurance businesses think about how they innovate more around their current resources, he said, whether that’s people, products or technology.

“I started Jireh last year with a view to helping these companies innovate because what I’ve found is that many reinsurance companies do a really good job at their core underwriting, quoting, claims handling and their core reserving – which is what they should be doing,” he said. “But everyone’s calendars are so filled with meetings that one quarter tends to bleed into the next and it seems you never have the opportunity to step back and just think. And the projects that do get kicked off tend to go nowhere because no-one can focus on them.”

What reinsurance companies need is to partner with strategic innovators who can help them understand what it will take to make an instrumental difference within their organisation – whether that’s process, product or technology innovation. Most people tend to jump straight from A-to-Z when it comes to technology innovation, with GenAI offering a prime example, he said, which can be interesting and exciting, but all too often is not practical.

“It’s like owning a Ferrari and living in Bermuda where the roads are too narrow to go faster than 40km per hour,” he said. “It looks great but it makes no practical sense. Our sector has got so many other areas we could focus on from a technology standpoint that, by comparison, look mundane and boring. For instance, we’ve got way too many people doing way too many tasks and processes that could be automated.

“Implementing common sense, basic technology that helps you deliver better products and services to your customers or your capital market investors in a much more transparent way is a much better use of your time and resources than investing in the bright red ‘Ferrari’ of a high-cost transformation project.”

Creating solutions for the problems the market actually faces

Jireh Connect was built out of a small reinsurance broker’s demand for a tech solution to the challenges they faced when trying to effectively distribute and manage their opportunities in the marketplace. It’s a SaaS-based solution, Tucci said, which empowers brokers to manage, distribute their deals and then manage and track the resulting feedback, so it can be reported on later. This not only generates significant market intelligence but also allows this data to be moved in a structured way to the broker’s downstream systems – be those claims, finances or documentation systems.

“Because, all too often, many brokerage companies on the reinsurance side go out to the market but when the market responds, they’re storing those responses here and there,” he said. “And when a deal is done it can take three, four, even five weeks to document that deal. Whereas if you actually capture it in a structured way where the deal details are upfront, everybody can be on the same page and it prevents double-keying.”

It’s critical to solve that data input challenge, he said, because if you don’t capture the data correctly early in the insurance process then by the time it gets to the reinsurers’ level, it’s simply not as effective as it could be. As to why the market has tried and failed to effectively solve this problem for the last 20 years, he noted that there are two core factors at play – either developers are creating solutions that are ‘trendy’ rather than what the market needs and wants or they’re coming at the solution from the wrong perspective.

“They’re looking at this curious, idiosyncratic market that we love to death – which is insurance and reinsurance – through more of a Wall Street or Silicon Valley lens,” he said. “They can’t get their head around the idea that somebody buying an insurance policy goes to a broker who goes to an insurer, and sometimes a retail broker goes to a wholesale broker who then goes to the wholesale market.

“And there’s a reinsurance broker who an insurance company buys reinsurance from and there’s a retro broker… So, by the time you spend $1 on insurance premium, the guy at the end gets 30 cents. The people looking in think it’s dysfunctional and I think we could all agree our market is very unique! But it’s been operating like this for 100 years and it’s been operating well, so it’s dysfunctionally functional.”

Understanding the power of relationships in reinsurance

Coming from the outside means developers don’t appreciate the nuance of how the market operates, he said, or the powerful emphasis placed on relationships. They think it’s as simple as matching risk with capital so when they build solutions, they do so without a genuine understanding of what the market wants. Twenty-five (25) years spent running and working with re/insurance brokerages has given Tucci a clear overview of what the market wants – which is to do what it’s doing better, faster and in a more streamlined way.

Taking a descriptive rather than prescriptive approach to digitizing insurance and reinsurance processes has been the key, he said, because different clients move at different speeds, and have different expectations about how they can make their data work for them. Innovating the re/insurance market isn’t about taking a “one size fits all” approach to putting technology to work or about reinventing the wheel.

Rather, he said, it’s about meeting brokers where they want to be met and helping them solve the challenges that are impeding the bread and butter of their businesses – by helping to coordinate their reinsurance placements, distribute deals, securely share documents with markets and capture external market feedback. The early feedback has been very strong, with the platform managing nearly $100 million of capacity in its first month, and Tucci said he’s looking forward to seeing where the platform goes next as more markets start to actively engage on the platform.

Insights from Munich Re highlight the intricate relationship between data utilization and the development of insurance strategies for managing cyber risks, as well as the impact of re-underwriting ransomware as it becomes more prevalent.

The cyber insurance sector is undergoing significant evolution it was noted, especially in its response to the challenges presented by ransomware.

In the wake of a noticeable increase in ransomware claims around 2019, cyber insurers saw their loss ratios escalate dramatically – some estimates indicate nearly a fourfold increase in ransomware claims frequency from 2017 to 2020. This surge pushed many insurers’ loss ratios to or beyond the 100% threshold.

The industry then responded with significant rate hikes from 2020 to 2022, leading to a subsequent improvement in financial outcomes, which some industry experts now believe could result in future rate reductions.

Modeling the effects of rate changes on an insurer’s financial performance can provide clear insights. For instance, a hypothetical scenario outlined by Munich Re shows an insurer starting with a 150% loss ratio, but after tripling rates, this ratio could be reduced to 50%. If this insurer were to then implement a 10% rate reduction, their loss ratio would potentially increase to 56%, with another reduction possibly raising it further to 62%.

This scenario, Munich Re explained, underscores the swift impact that rate adjustments can have on financial health, particularly the compound effect of even modest rate reductions on the loss ratio and the overall bottom line.

An essential in assessing current cyber rates

The improvements observed in cyber risk results for 2022 may also be attributed to several factors, including rate adjustments, enhanced risk selection techniques, or a decrease in underlying ransomware activities.

Munich Re noted that the sustainability of these improvements, complicated by factors such as the lengthening of claim development patterns and external influences, remains uncertain.

For insurers, understanding the full impact of re-underwriting is essential to assess the adequacy of current rates. According to Munich Re, a significant portion of the observed improvements was driven by rate adjustments and reductions in ransomware attack frequencies.

However, distinguishing the impact of re-underwriting from that of reduced attack rates due to geopolitical changes is crucial. This analysis will help predict the likelihood of a resurgence in claims if geopolitical conditions shift.

Insurers use claim count triangles, which track loss frequency over time, as a foundational tool in this analysis. By focusing specifically on ransomware claim counts, insurers can obtain a clearer view of trends and measure the effectiveness of their risk selection strategies, it was stated.

Munich Re emphasized the importance of continuously quantifying and enhancing these strategies to maintain growth and profitability.

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The World Bank has issued three catastrophe bonds providing $420 million in insurance coverage to the government of Mexico for potential disasters including named storm events on the Atlantic coast and earthquakes.

These new cat bonds not only replace but also augment by $60 million the coverage provided by previous bonds.

The World Bank has placed an emphasis on Mexico’s vulnerability to natural disasters, with over 40% of its territory and nearly one-third of its population exposed to hurricanes, storms, floods, earthquakes, and volcanic eruptions.

Economically, this translates to approximately 30% of Mexico’s GDP being at risk from three or more types of hazards, and over 70% at risk from two or more.

Mexico pioneered the use of the cat bond market for risk financing in 2006, becoming the first government to do so. Since then, it has sponsored 20 cat bonds to mitigate the financial impact of natural disasters.

These bonds were issued under the International Bank for Reconstruction and Development’s (IBRD) “capital at risk” notes program, designed to transfer risks related to natural disasters from developing countries to the capital markets.

The latest issuance drew interest from 27 institutional investors globally, securing catastrophe insurance financing for Mexico for the next four years. The bond payouts, which are contingent on specific parametric criteria being met regarding the location and severity of an event, will be handled by IBRD and passed to the Mexican government through intermediaries Munich Re and Agroasemex, S.A., a state-owned insurance firm.

Jorge Familiar, vice president and treasurer of the World Bank, highlighted the partnership and its role in protecting the country from losses.

“For almost two decades, Mexico has been partnering with the World Bank to access the risk-bearing capacity of the capital markets for its disaster risk management,” he said. “The continued success of these transactions is a good example for other countries we are working with, as they consider the capital markets as a resource for financial protection against unpredictable natural events.”

The transaction was facilitated by GC Securities, Aon, and Munich Re as joint structuring agents, with GC Securities and Aon serving as joint bookrunners. AIR Worldwide provided risk modeling and calculation services.

“Munich Re congratulates and is pleased that we had the opportunity to support the Mexican Secretariat of Finance and Public Credit as well as the World Bank by structuring and acting as fronting reinsurer in order to facilitate this successful capital market risk transfer,” Andreas Müller, head of global retro and ILS at Munich Re, said.

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The European Insurance and Occupational Pensions Authority (EIOPA) has issued a supervisory statement concerning the oversight of reinsurance agreements with third-country reinsurers.

The statement emphasizes reinsurance’s role as a crucial international, cross-border business that capitalizes on global risk diversification and provides significant benefits to insurance companies. EIOPA noted the need for thorough evaluation of actual risk mitigation in these reinsurance practices.

It outlined that the primary aim of the supervisory statement is to share the potential risks associated with using reinsurers that operate under regulatory frameworks not deemed equivalent to the European Union’s Solvency II standards.

It also covers, where applicable, reinsurance arrangements involving reinsurers from third countries recognized as having equivalent standards.

In its statement, EIOPA advocated for robust and consistent supervision of such reinsurance activities without curbing their use by introducing a risk-based approach to identify and manage associated risks.

The guidelines articulate supervisory expectations in multiple aspects, such as assessing the business context of reinsurance from third countries and emphasizing the necessity for early regulatory dialogue.

The supervisory considerations detailed in the statement also include how to evaluate reinsurance agreements and the related risk management systems of insurers using third-country reinsurers. Additionally, it describes essential tools aimed at mitigating any supplementary risks that may emerge.

What does this mean for reinsurers?

According to Lexology, EIOPA’s supervisory statement sets forth key expectations across three areas:

• Insurance firms are expected to manage their reinsurance strategies effectively. This involves weighing reinsurance premiums against additional risks, the impacts on Solvency Capital Requirement, and other factors stemming from the use of third-country reinsurance. Although the statement encourages ongoing supervisory dialogue regarding third-country reinsurance, it suggests this should occur before finalizing arrangements involving substantial risk transfer, without necessarily mandating an approval process.
   
• Insurers should ensure they are capable of monitoring and controlling risks linked to the domiciles of third-country reinsurers, including legal and compliance risks, collateral risks, and default risks. Companies must incorporate principles of reinsurer selection into their policies.
   
• Firms should examine aspects such as the parties’ rights to terminate, the presence of any side letter agreements that might compromise the agreement’s effectiveness, the claims hierarchy in case of a reinsurer’s default, and the availability of collateral arrangements in such events.

Addressed to National Competent Authorities, the EIOPA statement urges application in accordance with the principle of proportionality and a risk-based approach.

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Legacy acquisition group DARAG Insurance Guernsey Limited (DIGL) has entered into a sale and purchase agreement (SPA) to acquire a re/insurance captive based in the Cayman Islands. The agreement is contingent on approval from the Cayman Islands Monetary Authority.

DIGL, part of DARAG Group, plans to integrate the newly acquired captive into its operations and subsequently reinsure the extended tail of the portfolio through DARAG Deutschland AG, its core risk carrier in Germany.

The unnamed Cayman Islands-based captive was previously owned by a large multinational corporation and includes significant UK employers’ liability exposure. DARAG noted that this acquisition marks one of the group’s larger transactions within the captive insurance realm.

Tom Booth, CEO of DARAG, commented on the deal and the opportunity it will present for the legacy group in the future.

“This transaction is further evidence of DARAG’s dominance in the captive legacy space as well as its continued interest in acquiring and managing UK EL exposure. The group is confident, given the advanced nature of a number of other attractive opportunities in its core European market, that 2024 will deliver excellent growth,” Booth said.

“We look to the future with increasing confidence as demand for our legacy solutions is plentiful, investment yields and capital efficiency continue at attractive levels and competition at the small to mid-sized end of the legacy market reduces,” he said. “DARAG’s focused and well capitalized business, helped by its newly simplified structure is particularly well placed to take advantage of these much improved market conditions.”

DARAG is an international insurance and reinsurance group specializing in the assumption of discontinued business and providing capital and operational relief solutions. Since its inception, the group has successfully executed 67 run-off transactions across 21 countries, totaling a value in excess of €1.7 billion.

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With every new day bringing new use cases, the risks and opportunities presented by generative AI (GenAI) are becoming clearer than ever.

At the crux of the balancing act of utilizing GenAI while mitigating the threats it can pose is the same factor behind its recent evolution – its accessibility. It is this which sets GenAI apart from other elements of artificial intelligence, according to Barbara Fernandez (pictured), head of Insur_space at MAPFRE.

The “conversational” nature of the technology is enabling users from any background to access super complex and sophisticated applications at their own pace and in their own natural language. The fact that you don’t need to be an expert to use the tool is a critical factor behind its rapid acceleration, she said, and this democratization is also why there have been so many surprising applications of GenAI and its capabilities to date.

The role of insurance in a GenAI-equipped future

Sharing some insights into MAPFRE’s recent report into how different scenarios can map out ‘the role of insurance in a society embracing GenAI’, she noted that it is not posing new threats but rather has the potential to escalate threats already present in other digital technologies. Take, for example, cybersecurity and fraud, she said – they’re not new challenges for the insurance industry but the democratizing aspect of GenAI is making fraud much easier to commit.

“We need to be prepared as companies but also as individuals,” she said. “For instance, today, if you’re sharing audio, you are providing data to synthesise your voice, and even 10 seconds of recording is enough… Companies in insurance also need to work on your protection but, at the end of the day, the first and last door [threats] enter through is the one you open. Everything is about awareness and having the right training, both as companies and individuals.”

Understanding the ‘addictive’ nature of new technologies

While the cyber and fraud implications of GenAI are its main threats, Fernandez highlighted that other aspects of this tool are flying somewhat under the radar. One of these is related to mental health, she said, because it’s clear that there is a growing addiction to and reliance on digital technologies. Its accessibility means GenAI is making it easier for humans to interact with machines, which could advance this addictive behaviour.

“Again, GenAI is not generating this addiction but rather increasing it,” she said. “In a specific scenario, [a person] could create a relationship with a machine, if the processes are so sophisticated that you feel you’re communicating with another person… This is an extreme scenario which would have implications for a person’s mental health. But let’s not go to that extreme. Let’s look at where we currently are, which is that we are completely connected. And the easier your life is thanks to technology, the more you want to use it.

“This addiction is something that could generate some mental health issues. Other issues relate to critical thinking because when you’re asking for a summary or specific insights from information that you’ve shared with a machine, the issue is that human beings are lazy. We tend to think the things in front of us are correct, which is very high risk.”

The power of critical thinking needs to be preserved and nurtured, she said, particularly in the context of such highly accessible digital tools. Another potential risk for companies to bear in mind is how GenAI will impact how people interact with each other and companies, which could lead to the role of organisations shifting. In the future, the number of interactions with companies may be significantly reduced, which presents a risk to those companies which currently deal directly with consumers. They need to question what their role will be in a society that embraces GenAI – and they need to start questioning that now.

How insurance companies can equip themselves for the future

As to how insurance companies can walk the tightrope of opportunity and risk presented by GenAI, Fernandez cautioned on the need to take a measured approach to the technology, and not get blown away by the hype surrounding this tool. When any technology appears, she said, companies need to deep-dive into its capabilities and test them out.

Companies also need to face that there’s a growing gap between the individual employees who are training themselves to utilise GenAI effectively, and company-wide policies around GenAI use. That gap is growing, she said, and companies need to face this if they’re going to bridge that gap because you can’t stop people using it on their personal devices – rather, the focus needs to be on training employees to understand the tool and use it properly.

“The first thing companies that want to make the most of GenAI need to face at a corporate level is the need to train employees – and that’s reskilling all employees, not just the ones deploying the algorithm or the technical team – because everybody needs to understand how this works,” she said. “The second key thing is to recognise that GenAI is useful for a lot of use cases but not every single thing.”

Fernandez’s message is clear – insurance businesses cannot afford to be shocked by the hype around GenAI but invest and test to ensure that it’s applied only where it makes sense.

HDI Global, through its subsidiary HDI Risk Consulting GmbH, has launched a new service called “Climate Risk Reporting”, designed to assist businesses in analyzing and managing location-specific physical climate risks.

The company has aligned the release of this new offering with EU Taxonomy guidelines, so companies can comply with emerging legal requirements and regulatory frameworks concerning climate risks.

The service is tailored for companies that, starting in 2024, are subject to the Corporate Sustainability Reporting Directive (CSRD) and need to align with the EU Taxonomy.

HDI Global explained that its service utilises a detailed grid that assesses about 30 potential physical climate risks, categorizing customer sites into a six-level scale based on their vulnerability.

The insurer’s service highlights specific data, such as water depths, maximum temperatures, and heatwave durations, which businesses can use to implement risk mitigation strategies at their locations. This data is also crucial for supporting investment decisions and selecting new business sites.

By partnering with Mitiga Solutions, HDI has also expanded its database with scientifically validated data, which includes projections based on widely recognized climate change models from the IPCC. This enables not only compliance with regulatory demands but also supports more precise investment due diligence and future location planning.

Dr Dirk Höring (pictured above), a member of the HDI Global SE executive board overseeing property, engineering, marine insurance, and HDI Risk Consulting, explained this new proposition and the benefits for clients.

“With our climate risk reporting service, we are setting a new standard in the insurance industry. We are proud of our approach to act as a true partner in transformation. We not only highlight risks but also provide recommendations for action on how our customers can mitigate risks and seize opportunities,” he said.

The introduction of this new service also comes at the heels of a recent major expansion for the group, with HDI Global ramping up its mid-market efforts through new services.

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