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Global reinsurer Swiss Re has indicated that the insurance industry has significantly underestimated the impact of recent natural disasters in Europe and has raised concerns about some regions becoming uninsurable.

Gianfranco Lot, the group’s chief underwriting officer for property and casualty reinsurance, noted that models were substantially off in predicting the damage from events like the Turkey earthquake, the floods in Germany, and the hailstorms in Italy.

“Whether it’s the Turkey quake… or the floods in Germany or the hailstorms in Italy, models were off by factors as opposed to 10 or 20%,” Lot said to the Financial Times.

In 2023, global insured losses from natural catastrophes surpassed $100 billion for the fourth consecutive year, with $6.2 billion attributed to the Turkey earthquake.

Lot emphasized Swiss Re’s significant investment in improving its natural catastrophe models by incorporating more data. This effort aims to enhance the accuracy of predictions regarding the impact of such events.

Swiss Re identified the underestimation of extreme weather event costs as an industry-wide issue, stemming from inadequate data on current exposure and risk values. The increasing frequency and intensity of extreme weather events, driven by global warming, have escalated costs for the insurance and reinsurance sectors.

Homeowners worldwide are facing higher insurance premiums or struggling to obtain coverage, prompting discussions on the extent of government intervention needed to mitigate climate change costs for consumers. Lot stated that government intervention is necessary and beneficial in high-risk areas that have become uninsurable.

In the United States, the debate over disaster repair costs has been particularly contentious. Some home insurers have withdrawn from high-risk areas, such as parts of California. US home insurers often require local regulatory approval for pricing changes, leading to industry accusations that they cannot keep up with rising claims costs.

A senior executive from the American Property Casualty Insurance Association, Robert Gordon, also noted that government interference has led some US insurers to limit coverage in states frequently affected by natural disasters. Gordon asserted that efforts to prevent steep increases in home insurance costs have critically injured parts of the insurance market.

“That’s where you’re seeing in the US, the markets where you’re having a real availability crisis, it’s because the government is trying to suppress those [premiums],” Gordon said.

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The advent of generative artificial intelligence (gen AI) presents boundless opportunities and new exposures for the global media, film, TV, and entertainment industry.

At least one insurance leader is calling on the industry to adapt its approach to risks posed by the new technology.

Ros Breese (pictured), underwriting director – media, film & TV at Tokio Marine HCC International, said the rapid development of Gen AI has sparked intense discussions within the media insurance industry.

The technology presents a novel set of risks that diverge significantly from traditional content creation methods, spurring concerns about “how and when it’s okay for our clients to be using generative AI to create content, and how insurers can manage and assess that risk,” Breese told Insurance Business.

She said the unique nature of these risks, coupled with the rapidly evolving landscape, has led to a cautious approach to AI and generative AI among media and film companies.

Media, film and entertainment firms exposed

The industry’s cautious stance also comes amid notable legal cases, such as an ongoing New York Times lawsuit against ChatGPT owner Open AI over the use of archival material in generative AI tools.

The US news organization has claimed its copyright was infringed to train models. The lawsuit, which also names Microsoft as a defendant, says the companies must be accountable for billions in damages.

“There’s a nervousness in the media industry about when it’s okay to use AI, whether as a research tool or for content that might be released later,” Breese said. “Everyone has a different take on it. There’s uncertainty about what’s acceptable, especially from an insurance perspective. Will insurers cover claims for content created with generative AI?”

The immense challenge of tracing original content ownership in gen AI material leaves companies vulnerable to IP claims. As generative AI becomes more widely used, the insurance industry will need to adapt its approach to the risks it poses, argued Breese.

“All content is owned by somebody,” she said. “In traditional TV production, there are criteria for clearing rights from writers and third-party content providers. That’s not possible with generative AI.”

Risk management for gen AI risks should involve developing protocols to trace content origins and establishing a chain of responsibility between clients and generative AI tools. Legislative clarity and landmark cases such as the New York Times lawsuit will also play pivotal roles in shaping future insurance strategies.

“I think we’ll probably end up viewing it the same way as other content and working with insurers to mitigate claims. This means recognizing what generative AI is used for and ensuring we can track the original content owner, creating a chain of responsibility between them and the AI tool,” she said.  “We’re on a journey.”

Beyond fiction content – how has the media landscape changed since COVID-19?

The highly dynamic risk landscape in media has recently prompted Tokio Marine HCC to launch a global media division dedicated to underwriting risks in the media, film, television, and events sectors.

Breese, who has been tapped to lead the division, joined TMHCC in 2018. She has over 25 years of experience in the industry and has held senior roles at Beazley, Hiscox and Markel.

Beyond the technological challenges, the media consumption landscape itself is shifting, influenced heavily by the pandemic. There’s a marked trend away from traditional production content towards shorter, more digestible formats like podcasts, said Breese.

“As insurers, we’re seeing a lot more podcast material than ever before, particularly in the true crime genre. There’s a significant interest in documentaries using archival footage, as opposed to big-budget dramas,” she observed.

“If you look at streaming services now, there’s a vast portfolio of documentaries available, something we wouldn’t have seen five or ten years ago. We’re seeing a clear trend away from fictional drama towards factual content.”

This trend necessitates a different approach to risk management. Documentary makers, for instance, face unique challenges in securing permissions from individuals appearing in their work and clearing archival footage.

“For a documentary maker, the key is to make sure that they’re getting permission from everybody that’s appearing in that documentary, which can be a bit of a minefield in itself,” Breese said.

The complexity of clearing archival footage and the use of defenses like fair use and fair dealing further complicate the production process. These challenges, Breese said, highlight the need for specialized insurance solutions tailored to the nuances of documentary and factual content production.

Breese advised brokers working with clients in media and film to stay abreast of evolving risks and their clients’ distinct coverage and risk management needs.

“The more open the relationship and the conversation for all parties in the insurance chain the more it helps,” she said.

Do you have something to say about the risks posed by the use of generative AI in the media, film and entertainment industry? Please leave a comment below.

London-based digital risk exchange InsurX has welcomed Canopius founder and former Council of Lloyd’s member Michael Watson (pictured) as non-executive chairman.

Watson, who will be succeeded by Andy Haste as Canopius chair in July, brings significant governance experience to his new role as InsurX advances its technology and widens the company’s workforce to meet growing client demand. As part of its growth plans, InsurX is also expanding into new business classes.

Commenting on his appointment, Watson said: “We have all known for about three decades that London must trade more efficiently, and I have seen lots of different digitalisation initiatives come and go. InsurX is finally delivering the market infrastructure we need to realise the promise of the digital revolution in general, and algorithmic trading specifically.

“I am delighted to support the venture, and I encourage all risk carriers and brokers to explore its offer. InsurX is the perfect solution for the market. It isn’t aligned to a specific insurer or broker and has no aspirations to become one, but it offers those companies an extremely flexible way to extend their distribution or find new capacity. It’s a winner.”

Meanwhile chief executive Gilbert Harrap highlighted the significance of Watson’s arrival, saying: “Our ability to attract a chairman of Michael’s stature illustrates not only the rising importance of algorithmic underwriting in the specialty insurance market but also the potential of InsurX within it.

“That potential is reflected in our growth: at latest count, we have 13 member insurers trading £100 million of capacity, and 20 global Lloyd’s brokers placing risk through our independent exchange.”

Harrap further outlined their ambitious plans for the year amid the growing volume of business traded over the InsurX Exchange.

“We intend – before the year is out – to add new classes of business to our existing functionality to trade contingency and property D&F (direct and facultative),” the CEO said. “Again, that’s ahead of schedule, in response to demand.

“We’ve had to recruit to develop those new capabilities, and to enhance our current offering, and develop our service and support functions as we mature. We’re driving the evolution of better, faster, cheaper risk trading in the specialty insurance market, and it’s happening fast.”

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AM Best has revised its outlook for the global reinsurance segment to positive from stable, signaling clear sailing ahead for the industry – but not without its challenges.

In 2023, for the third consecutive year, the global reinsurance segment generated positive underwriting results, with several reinsurers reporting combined ratios below 90%. In 2022, these results were heavily offset by unrealized investment losses in fixed income portfolios, which have since been mostly recouped due to higher reinvestment rates. In 2023, many reinsurers produced return on equity (ROE) exceeding 20%.

According to AM Best, recent improvements in underwriting margins followed a period of disappointing results after significant weather-related losses in 2017, including Hurricanes Harvey, Irma, and Maria. Efforts to reprice and tighten terms and conditions, alongside a reduced appetite for aggregate protection, a focus on named perils, and a shift from proportional to excess of loss covers, contributed to these improvements.

Additionally, several companies have reduced their exposure to natural catastrophe perils, especially in high-frequency layers, leading to more stable underwriting profits.

These profits became evident in 2021 with market hardening, confirmed by the dislocation of the renewal season in early 2023. Cedants and reinsurers realigned their roles, with reinsurers focusing on providing balance sheet protection rather than earnings stabilization.

Exceptional ROEs for 2023 a one-off

AM Best anticipates that the exceptional ROEs seen in 2023 are unlikely to be repeated at such high levels, though reinsurers are expected to maintain underwriting discipline. Despite some signs of deceleration or slight rate softening at the most remote layers of protection, pricing remains robust with limited appetite for higher frequency layers. Tightened terms and conditions are crucial for sustaining and stabilizing technical margins.

Unlike previous hard market cycles, the current cycle is not characterized by a shortage of available capital. Recent negative rating actions on reinsurers have been driven by technical underperformance rather than surplus declines. The best performers continue to expand through oversubscribed capital raises and retained earnings but deploy resources prudently.

Major European players maintain active special dividend and share buyback policies. Investors are more likely to allocate new funds to rated balance sheets with scale and a proven track record, or opportunistically to Insurance Linked Securities (ILS) structures where liquidity is critical.

The end of a period of record-low interest rates has changed the economic landscape, increasing competition for resources between the reinsurance segment and other investment alternatives.

This competition is intensified by the past underperformance of the segment and its perceived volatility, particularly given current climate trends and geopolitical instability. Despite de-risking measures on reinsurance portfolios, it will take time for investors to reduce the risk premium applied to reinsurers.

Reversal of investment losses

Unrealized investment losses in fixed income portfolios, resulting from sharp interest rate increases and reducing global reinsurers’ capital and surplus in 2022, were largely reversed by the end of 2023.

Except for that particular year, dedicated capital for the global reinsurance segment has steadily expanded over the last decade. This recovery might have been more pronounced if not for sizeable dividend distributions by the largest groups.

AM Best’s positive outlook considers the challenges the global reinsurance segment still faces. Heightened natural catastrophic activity, increasing relevance of cyber risks, geopolitical uncertainty, and economic and social inflationary pressures remain crucial topics in the ratings assessment. Global reinsurers have generally leveraged their enterprise risk management frameworks to dynamically adjust strategies to a changing market environment.

Global reinsurers can adapt their business mix and risk profiles to evolving market conditions. Well-diversified organizations can use various strategies to enter and exit particular market segments based on performance expectations.

Examples include the shift away from high-frequency layers in property natural catastrophe coverage, increased caution in writing certain US casualty lines, and the repricing and tightening of terms and conditions to reduce uncertainty linked to unforeseen events such as global pandemics or international armed conflicts.

A key challenge for global reinsurers is balancing prudent capital deployment to support adequately priced risks while maintaining relevance in an increasingly uncertain world due to geopolitical factors, climate trends, and societal or technological changes.

Historically, reinsurers have demonstrated their ability to innovate and refine underwriting tools, as seen with natural catastrophe models and the development of ILS instruments. This trend is expected to continue, given the rising importance of new risks in cyber, secondary perils, and certain casualty lines.

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A recent study suggests that natural and climate-related disasters have been decreasing, challenging the narrative presented by several prominent international agencies. This report aligns with the long-standing assertions of the Global Warming Policy Foundation (GWPF), which has disputed claims of increasing climate disasters.

Organizations such as the UN Office for Disaster Risk Reduction (UNDRR), the Food and Agriculture Organization of the United Nations (FAO), the World Meteorological Organization (WMO), and the International Red Cross (IFRC) have reported a rise in climate-related disasters. However, the GWPF has argued that these reports are misleading, suggesting that technological advancements since the 1970s have led to increased disaster reporting rather than an actual rise in disasters.

The new study by Italian scientists Gianluca Alimonti and Luigi Mariani in Environmental Hazards claimed a declining trend in the number of natural and climate-related disasters in the 21st century. Their analysis of disaster reports since 1900 reveals a significant decline in such events up to 2022.

“The assertion that we are facing an increasing trend of natural disasters, as claimed in the three official reports by UNDRR and FAO on the basis of the same EM-DAT dataset […] is not supported by data,” it said in the study.

The authors emphasized that the empirical data contradicts earlier analyses by the UN bodies, which predict an increasing number of natural disasters and impacts due to global warming: “Our analyses strongly refute this assertion as well as extrapolations published by UNDRR based on this claim.”

The scientists expressed concern over the misrepresentation of natural disaster trends, warning that such claims have been widely disseminated by various media and the FAO. They argued that this misrepresentation can lead to inconsistent policies at both national and international levels, potentially wasting resources or diverting them from more pressing issues.

“The new study by Alimonti and Mariani vindicates what we said in a GWPF report three years ago—climate-related disasters are not on the rise, despite global warming. Claims to the contrary have been made for years by several international agencies. Yet, these agencies failed to recognize that the apparent increase in natural disasters since the 1970s simply reflects a major increase in disaster reporting due to new technology,” said Dr. Ralph Alexander, who is an expert critique of erroneous climate disaster claims.

This is what GWPF director Dr. Benny Peiser had to say.

“There is a famous saying that sums up the GWPF’s efforts to set the record straight on disaster trends and climate disasters: ‘First they ignore you, then they laugh at you, then they fight you, then they join you.’”

Global reinsurance broker Gallagher Re has announced the promotion of April Engelman (pictured) from executive vice president and operations director for North America to chief operating officer of its North American region.

Gallagher Re North America CEO Brian Flasinski expressed his excitement for Engelman’s new role.

“We are thrilled to welcome April to the North American leadership team,” he said. “April brings a wealth of knowledge across operations, deep expertise and proven leadership — invaluable assets to support the business as we embark on the next chapter of our growth story. We are also excited to have filled this position from our existing talent.”

Who is April Engelman?

Before being a part of Gallagher Re in 2021, Engelman started her career as an account analyst at Willis Re. After three years, she was promoted to treaty analyst and continued climbing up the ladder first as business process manager before becoming senior vice president, regional operations manager – Midwest.

Following Gallagher Re’s acquisition of Willis Re, Engelman then joined the firm as executive vice president, North America operations director, where she became integral to the smooth transition between the firms.

Engelman expressed her sentiments regarding her new role.

“It’s an honor to continue to serve the North American region in this new role, and I look forward to collaborating with the leadership team. We share a passion for the business and dedication to operational excellence, and I look forward to expanding our partnership as we continue to drive the business forward,” she said.

Engelman will be replacing Mark Hansen in the role as he had been recently promoted to Gallagher Re’s chief operating officer. With her promotion immediately taking effect, Engelman will be reporting to Flasinski and will be based in Minneapolis, Minnesota.

Gallagher Re is a reinsurance broker and advisory firm that operates across the risk and capital business.

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A new report by the Bermuda International Long Term Insurers and Reinsurers (BILTIR) has revealed significant stability and growth within Bermuda’s long-term insurance market. Specifically, 92% of BILTIR members’ rated assets under management are investment-grade, while assets held by these companies exceed their liabilities by $231 billion.

BILTIR based its findings on a study involving 55 life and annuity (re)insurers who are members of the association. One significant finding is that BILTIR members have made total benefit payments of $137 billion over the past five years, highlighting efforts to address the pension protection gap.

Assets held by reporting companies exceed their liabilities by $231 billion, indicating a high level of asset diversification used for reinsurance, direct writing, and growth financing.

The analysis shows that 92% of BILTIR members’ rated assets under management are investment-grade, with 95% of their bonds, debentures, and structured assets also being investment-grade. In addition, 77% of these assets benefit from secured trusts, funds withheld, or MODCO arrangements, reflecting stable investment capital that fuels industry innovation.

“As evidenced by this data, Bermuda’s insurers and reinsurers hold an important role in protecting policyholders. Strong, evolving regulation and stable capital investments create an environment for excellence within the industry,” BILTIR CEO Suzanne Williams-Charles said.

“Addressing the pension protection gap is a global issue, and Bermuda is taking center stage as the location to support the changing industry. This jurisdiction stands as a best practice model for others.”

The world is facing massive challenges, from climate change to political instability. However, emerging industries including climate tech, bio tech and artificial intelligence (AI) could perhaps offer solutions to some of the problems. These startup companies can struggle to find the investment and insurance coverages they need and could be a big opportunity for brokers.

Joseph Ziolkowski (pictured above) is CEO of Bermuda-headquartered Relm Insurance. His firm has 50 employees in locations including Miami, London and Dubai and specialises in coverages for emerging industries.

One of the areas he’s focused on is alternative therapeutics, particularly psychedelic drugs.

Psychedelic drugs: an insurance perspective

Insurance Business asked Ziolkowski why he became interested in psychedelic drugs from an insurance and risk perspective?

“It was really about acknowledging the really important advancements in an emerging area that were going to potentially fundamentally shift the way people approached certain things,” he said.

Ziolkowski said the medical field of alternative therapeutics signals a growing awareness that neurological diseases, including PTSD, eating disorders and substance abuse, are not very responsive to traditional clinical treatments.

“The ability to use psychedelics to actually create material improvements in the way that these disorders and diseases are treated is real,” he said.

Ziolkowski said there is a significant amount of funding moving into this sector.

“You’ve got sophisticated institutional investors that are investing in early stage companies using psilocybin, MDMA, ketamine, DMT, Ayahuasca right – and these are otherwise known as controlled substances or illicit drugs – to make really important and incremental advancements in the treatment of really debilitating diseases,” he said.

Regulatory frameworks for psychedelics around the world

Around the world, the regulatory framework for using these drugs medically, he said, is also moving quickly forward.

“You’ve got Alberta in Canada, which was the first province to legalise or decriminalise certain aspects of psychedelic compounds,” said Ziolkowski. “You’ve got two states in the US that have made headway in the form of legalising or decriminalising.”

He said there are also 25 US state referendums that are making decisions concerning how drugs like psilocybin and MDMA can be used to treat certain types of diseases.

“You’ve got Australia, which was really the first country to make material advancements in the reclassification of MDMA and psilocybin from Schedule 9 [prohibited] to Schedule 8 [controlled drug], allowing clinical use of these drugs for psychiatrists to put these types of psychedelic compounds to work,” said Ziolkowski.

The Relm CEO said many other similar kinds of legislative advancements are being considered by governments around the world.

“Primary benefit”: D&O

“If you look at that momentum, over a relatively short period of time, then you look at the funding that’s coming in from institutional investors,” he said. “Then you look at the, so far, trickle of activity from traditional pharmaceutical companies that are beginning to make investments and acquisitions of companies in early stage clinical trials for certain types of psychedelic compounds – these companies are going to need insurance.”

Ziolkowski said coverages are needed for these startups to bring directors on to boards, enter into contracts and comply with regulations.

“One of the main uses of our capacity is for companies in these early stage clinical investigations for the use of things like MDMA and psilocybin,” he said. “This is really part of their capital raising initiative.”

At this early stage, he said, these firms are trying to attract medical experts and other industry players for their clinical trials and boards.

“If you’re a credible professional being asked to serve on the board of any company, never mind a company that’s doing perceived high risk activities and investigations, you’re likely not going to be excited about exposing all of your personal liability without any directors and officers liability insurance, right?” Ziolkowski said.

He said a “primary benefit” an insurance firm like his can provide is securing “substantive coverage for directors officers liability.”

“This allows them to bring on experts and professionals that help bring, not just credibility and capability to their company, but also satisfy investor concerns,” said Ziolkowski.  “That allows them to raise more capital and extend their investigation into these clinical trials.”

Are you involved with emerging industries? How do you see the insurance opportunities? Please tell us below.

CNA Financial Corporation executive vice president and global head of underwriting Doug Worman (pictured) will step into the roles of president and chief executive at the start of next year.

The appointment will see current chairman and CEO Dino E. Robusto transition to the executive chairman position. In his new capacity beginning 2025, Robusto will lead the CNA board of directors while acting as a strategic advisor to Worman, supporting the company’s objectives.

Expressing his confidence in Worman’s capabilities, Robusto stated: “Doug is an exceptional underwriting executive and has strengthened and solidified CNA’s underwriting culture and profitability.

Worman, reflecting on his upcoming remit, commented: “I am honoured to take on the CEO role, building upon Dino’s success in optimising CNA’s strategic underwriting direction. My goal is to continue elevating CNA as a preeminent P&C (property and casualty) insurer.”

Since joining CNA in March 2017 as executive vice president and chief underwriting officer, Worman has played a crucial role in developing CNA’s product organisations and business units. He spearheaded the company’s global underwriting committee, which led to his current position as global head of underwriting in 2022. CNA’s operations span the US, Canada, and Europe.

Before joining the insurance group, Worman held several key positions, including CEO of Endurance US Insurance, executive vice president of Alterra Capital Holdings, and chief executive of Alterra US Insurance. His career began at AIG, where he progressed through various underwriting and management posts, ultimately becoming president and CEO of AIG Excess Casualty Group.

Meanwhile James S. Tisch, a CNA board member and the CEO of the firm’s largest shareholder (Loews Corporation), added: “We are extremely thankful to Dino who, over the past eight years, has worked tirelessly to lead the company to record levels of profitability and top quartile underwriting performance.  We are delighted that he will continue to advise CNA as executive chairman.

“As we look to the future, we know that Doug is a dynamic and proven leader with a clear vision for the company.”

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