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The prolonged downturn in China’s real estate market since February 2022 has sparked concerns about a potential financial crisis with global repercussions. However, as the industry enters the new year, Swiss Re forecasts that such a crisis appears unlikely.

Analysts point to several factors mitigating the risk, including peaking real estate debt levels, government policies to deleverage, and fiscal spending on key projects. These measures are expected to stabilize the property market and, in turn, bolster consumer and investor confidence, leading to economic growth at a new, albeit lower, norm. This stability could also positively impact China’s property and casualty (P&C) insurance sector.

The property market’s decline has been attributed to a combination of cyclical factors like slowed income growth during the pandemic and structural issues such as the shrinking working-age population and diminishing returns on investments. This slump has dented household and business confidence, curbing domestic growth and raising the risk of a liquidity trap.

The real estate sector’s troubles have since rippled through the economy, impacting investment and consumption and affecting approximately 24% of real estate-related value chains that contribute to GDP.

China’s GDP forecasts

The forecast for China’s GDP growth in 2024 is 4.5%, with reduced real estate investment expected to shave off 0.5-0.7 percentage points. The global interest rate hikes in 2022-23 led to defaults in China, especially on USD-denominated debt. However, the risk of systemic default is considered limited due to the nature of the property sector’s debt and government efforts to manage deleveraging.

The outstanding debt in the sector is estimated at CNY60 trillion, or nearly 50% of 2022 GDP, with home mortgage loans and corporate debt constituting significant portions. The relatively high down payments required for mortgages and most of the corporate debt being in the form of bank loans suggest a containment of large-scale defaults.

The government’s policies to stabilize the property market, including ensuring completion of pre-sold residential properties, lowering mortgage rates and down-payment ratios, and extending corporate loan repayment terms, have been instrumental. The government’s priority on economic growth for 2024 indicates more fiscal spending, alongside monetary policy easing. Plans include significant investment in affordable housing, urban village renovation, and emergency public facilities, aimed at supporting lower-income households and easing pressure on the commercial market.

This fiscal spending and policy support are expected to restore confidence in the market and underpin economic growth. In the insurance industry, these developments present new premium opportunities, particularly in engineering, commercial property, and liability business, within the P&C sector.

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Everest Reinsurance has announced the formation of a new global specialties business unit, an initiative which consolidates the company’s expertise in diverse areas such as aviation, marine, cyber, engineering, and parametric solutions.

Leading this new division is Phil Taylor (pictured above), appointed as head of global specialties, reporting directly to Jill Beggs, head of North America and global specialty reinsurance.

Taylor brings over 25 years of experience in the specialty insurance sector. Before his current role, he served as global head of aerospace for Everest Reinsurance.

According to LinkedIn, his prior experience also includes managing substantial aviation portfolios, notably at Liberty Specialty Markets. Taylor also held various positions at AXIS Re, including deputy unit head, and spent over a decade at Aon, most recently as a specialty lines broker.

“Since joining Everest, Phil has transformed our aviation portfolio into the market-leading practice it is today. I’m confident his strong leadership skills and global specialty expertise will elevate our position across all specialty lines,” said Beggs. “Phil is the definition of a high performing leader and I look forward to working with him and the team as we continue evolving our business to align with clients’ and brokers’ needs and deliver the exceptional service and value they deserve.”

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Global reinsurer PartnerRe Ltd (PartnerRe) has confirmed that CEO Jacques Bonneau is set to retire from the company, effective April 1, 2024, with Philippe Meyenhofer taking the reins as CEO and joining the board of directors.

To ensure a smooth transition, Jon Colello – currently serving as CEO of P&C Americas – will additionally assume the role of PartnerRe president, overseeing all non-life underwriting and reporting directly to Meyenhofer. In the interim, Bonneau will delegate the majority of his duties to Meyenhofer and Colello.

New CEO

Meyenhofer, who has been with PartnerRe since 2010, has ascended through the ranks over the years. His journey has included appointments as head of specialty casualty PartnerRe global in 2013, head of Europe P&C in 2016, and deputy CEO P&C in 2018. In 2020, Meyenhofer assumed the role of CEO of PartnerRe’s specialty lines.

In his new role, Meyenhofer will continue to be based in the company’s Zurich office.

New president

Colello, a member of PartnerRe’s executive leadership team, has been responsible for leading the property & casualty business in the US, Canada, and Latin America, along with overseeing the company’s health business in the US since joining in 2019.

In his new role, Colello will continue to be based in Stamford.

Other appointments

With immediate effect, Christian Mitterer assumed executive responsibility for specialty lines as specialty lines CEO, while Ingrid Gjonaj joined the executive leadership team as P&C EMEA CEO.

Mitterer, a member of the executive leadership team since 2012, previously served as CEO P&C EMEA.

Gjonaj, who has been with PartnerRe since 2006, has held senior positions in legal and underwriting and currently serves as head of region for Western and Southern Europe.

Board welcomes leadership team overhaul

Commenting on the appointments, PartnerRe chairman Thierry Derez emphasised the organisation’s internal talent pool.

“The fact that we are in the position to appoint PartnerRe’s next CEO and president from within the company speaks to the strength and depth of talent in the organisation. Together, Philippe and Jon bring a wealth of industry experience, proven business and leadership skills, and strong track record in underwriting combined with a deep knowledge of PartnerRe’s clients, brokers, and employees,” he said.

Derez expressed gratitude to Bonneau for his leadership over the past three and a half years, emphasising the strengthening of the company’s business, strategic positioning, financial results, and operational excellence under his stewardship.

“Jacques also led the successful transition to Covéa ownership. Jacques has been a very dedicated and strong leader and we wish him all the best in his retirement,” he said.

Bonneau said: “I am proud of what we have achieved and the progress we’ve made in our various business and support units and operations with the improvement in our executional performance and delivery for our numerous stakeholders.

“I am confident PartnerRe is well positioned for future success and Philippe, Jon, and the executive leadership team provide continuity with their in-depth knowledge and insight of PartnerRe’s people and business.”

The global reinsurance industry witnessed a substantial recovery from previous capital losses in 2023, as reported in a new commentary by AM Best. This recovery was attributed to strong technical results, unrealized capital gains, and increased reinvestment rates.

Investment losses which were experienced in 2022 saw a partial reversal in 2023, complemented by higher fixed-income reinvestment rates, leading to robust overall investment income for the industry. Despite these gains, the recovery was somewhat offset by capital distributions by market participants.

Last year, AM Best forecasted a 12.2% year-over-year increase in traditional reinsurance capital, amounting to US$461 billion. However, following the conclusion of the North American hurricane season, reinsurers were on track to nearly double that increase. The balance between available and deployed capital continues to be a significant factor.

Some reinsurers are also still determining their capital strategies, while others, like Berkshire Hathaway’s National Indemnity, opted for substantial special dividends, notably a US$83 billion payout in the third quarter of 2023.

Dan Hofmeister, associate director at AM Best, noted that reinsurers, with improved operating results and high discount rates, face decisions on capital release or investment in the hard market.

“Regardless, our original projected increase of 12.2% in traditional reinsurance capital still appears adequate, albeit with some potential variation if reinsurers avoid deploying the new capital generated in 2023,” Hofmeister said.

Third-party reinsurance capital is also expected to see a moderate 4% increase for 2023, supported by record issuances of catastrophe bonds. The total reinsurance capital for 2023 is anticipated to reach US$561 billion, just under 2% shy of the 2021 high of US$570 billion. The January 2024 renewals are expected to be more orderly, but no indications suggest a softening of market conditions.

Carlos Wong-Fupuy, senior director at AM Best, commented on the potential impact of new reinsurers entering the market, noting that despite several high-profile management teams announcing plans to launch new reinsurers, no substantial business plans have been funded to date.

“Even if funding is ultimately achieved, it would dwarf the retained earnings growth among established players in 2023 and would thus be unlikely to soften the market,” Wong-Fupuy said.

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Merck has struck up a settlement with insurers over its $1.4 billion NotPetya cyberattack claim, according to reports.

The US pharmaceutical giant made an eleventh-hour confidential agreement with insurers on Wednesday, putting a stop to a case that could have set a national cyber insurance precedent, Bloomberg Law first reported.

Twenty-six policies were originally at issue in the case, but by last May, when the appellate court delivered its ruling in Merck’s favor, just eight insurers accounting for around $700 million (or 40%) of coverage had yet to settle.

However, the appellate court found in May that the “exclusion of damages caused by hostile or warlike action by a government or sovereign power in times of war or peace requires the involvement of military action.”

“The exclusion does not state the policy precluded coverage for damages arising out of a government action motivated by ill will,” it found.

The court’s stance has proved somewhat controversial among the insurance and legal communities.

The original decision, on which the appellate court ruled last May, had been criticized by Kennedys partners Joshua Mooney and Julia Selby as looking “backward to a century past”.

Insurance companies have tightened wordings to plug cyber systemic risk gaps

Haunted by the specter of systemic risk, insurers have moved to tighten policy wordings around cyber-attacks.

In 2020, Lloyd’s clamped down on silent cyber in all-risks policies.

NotPetya – the Merck and international impact

The White House blamed a Russian action against Ukraine after the NotPetya malware made its way into systems worldwide in 2017, causing billions of dollars’ worth of damage.

Merck was just one victim, with businesses having been affected by the 2017 cyber incident across 65 countries.

Merck’s case, it took just 90 seconds for 10,000 of its machines across its global network to be infected. This doubled to 20,000 within five minutes, and overall more than 40,000 machines were bought down, according to court documents.

What’s your view on the Merck NotPetya cyber insurance case and how insurers are navigating cyber exposures? Leave a comment below.

In a new commentary, AM Best anticipates that the financial impact of the January 1, 2024 earthquake in Japan on major domestic non-life insurers will be manageable in relation to the sector’s net profit.

This perspective was detailed in the commentary titled, “AM Best Expects Insured Losses from Japan’s January 2024 Earthquake to have Limited Credit Ratings Impact.” The report notes that a significant portion of residential earthquake risks in Japan are supported by a state-backed reinsurance scheme. Consequently, most losses incurred by domestic non-life insurers are likely to arise from commercial and industrial risks.

The firm added that Japanese insurers typically employ conservative reinsurance strategies. This approach, along with the relatively low earthquake reinsurance attachment point in comparison to their capital positions, has effectively transferred a substantial portion of earthquake risks to the international reinsurance market.

“While the earthquake losses would drag the proportional treaties results, if losses were to hit individual companies’ earthquake reinsurance excess-of-loss layers, it might fuel rate increases in the upcoming April 1 reinsurance renewal,” AM Best director of analytics Chanyoung Lee said.

The non-life insurance sector in Japan faced substantial catastrophe losses from Typhoons Nanmadol and Talas in 2022. However, the year 2023 was comparatively benign in terms of natural catastrophes for the industry.

AM Best expects that the adverse impact on profitability within the fire insurance segment, which is anticipated to bear the brunt of the earthquake losses, will likely be mitigated by profits from other lines of business. The report also highlights that most non-life insurance lines have seen growth in premium income over the past 12 months, buoyed by primary rate increases.

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The insurance trade press headlines generated in the first week of 2024 offer a snapshot of some of the key themes expected to dictate discussions this year. Many of these are holdovers from 2023, innately familiar though offering the promise of fresh opportunities and challenges in the context of the clean slate provided by a New Year.

M&A activity is a staple of insurance themes, alongside questions about talent recruitment and retention, the impact of regulation and, more recently, the rapid advancement of digitisation technologies.

Each of these has already had airtime this week, including multiple senior executive level appointments with Stonybrook Capital welcoming a new group MD and international CEO in Darren Bailey and Staysure Group naming Finn Walsh as its new group CEO.

Regulation remains a key area for consideration

All eyes remain fixed on the regulatory landscape too, particularly in anticipation of the launch of the 2024 BIBA Manifesto in parliament next week. And it didn’t take long for the sector to set out its stall on the question of regulation. The second day of the year saw the UK insurance industry call on the government to implement lighter regulations for captive insurance companies. This is in advance of a planned government consultation on the prospective design of a new framework to encourage the growth of captive insurance companies in the UK.

Data and technology – what’s happening in 2024?

Technology and data remain pressing topics on the agenda of insurance businesses in 2024 with Send CEO Andy Moss highlighting how over the last 20 years, insurance has evolved from being one of the last paper-based industries to truly embrace digitisation. Large scale change seems to be well within the risk appetite of the market if the speedy embracement of generative AI in the latter half of 2023 is anything to go by.

There can be little question that the inclination for operational efficiency is being matched by the development of new technologies able to reform and transform the internal productivity of even the most intricate business models. With these opportunities, there naturally come challenges and 2024 is likely to bring a more fulsome picture of the broader risk represented by these technologies as increased utilisation brings further questions around ethical considerations, overdependence concerns and worries about its implications for cybersecurity.  

Cybersecurity concerns represent a clear and present danger to government, industry and individuals alike. But it also offers an opportunity for the insurance industry to step up and present itself as part of the solution to the cybersecurity risk puzzle that is becoming more complex with each passing day.

The industry needs not just to throw its weight behind those developing new cybersecurity products and services but become more actively invested in their development, rollout and ultimate success. In that respect, 2024 got off to a very positive start with the news that Beazley has finalised its $140 million cyber catastrophe bond.

The roadmap to insurance innovation is well read and signposted but the road itself needs to be better travelled if we’re to make good the wishes we’ve given and received for us to have a happy and successful 2024.

It was an “entrepreneurial itch” that led CEO Andy Moss (pictured) and his two co-founders – Ben Huckel and Matt McGrillis – to strike out on their own and set up Send in 2019. That initial spark has since fanned into a flame that has seen the insurtech go from strength to strength, underpinned by a fast-growing team and favourable market conditions that are seeing clients embrace innovation in underwriting.

Building a technology company to serve the pre-bind insurance space has been an incredible journey to date, he said, and one which has required every ounce of software and technology expertise he and his co-founders obtained through their 20-plus years of serving the London market. Supporting and enabling the underwriting side of the insurance lifecycle brings great variety, he said, and it’s a spark unlikely to fade given the fast pace of evolution being seen across the insurance ecosystem.

“You’ll hear it a lot from companies that have grown like us, but we’ve been very lucky along the way to have some great people throw their weight behind us,” he said. “Our customer base wanted to see something different in the market and wanted to encourage some plucky, smaller company to do that something different. The state of the market as set by the larger incumbent software vendors has been a real catalyst for our success.”

Understanding the evolution of technology in underwriting

Assessing how the role of technology in underwriting has changed, Moss noted that he came to insurance from a role as a software developer at the BBC. When his eldest child was born, he said, he looked for a job locally – and so joined the ranks of his peers by falling into insurance and never looking to fall out of it. Over the next two decades, he dipped in and out of the underwriting side but when he came to co-found Send, he realised how much data and information had evolved.

“Over 20 years, insurance has evolved from being one of the last paper-based industries to really embrace digitisation,” he said. “And through that journey, the amount of information has stayed the same but the amount of data used in underwriting just increases year-on-year. The availability of data sources accessible to make a decision about a risk today, compared to 10 or 20 years ago, is incredible.

“There’s data for every variable you might want to cover these days. The volume of data has gone up massively which presents a real opportunity. But I think most insurers are lagging behind when it comes to leveraging that data because they’re still working on spreadsheets and email, and they haven’t yet got the right technology in place to really support their underwriting.”

How increased digitisation is impacting the future of insurance talent

An overloked consideration when evaluating the rise of digitisation and its impact on the market is the impact this is having on the ability of insurance businesses to attract and retain the right talent to future-proof their organisations and the wider industry. If you look at the types of roles being advertised by insurers these days, he said, you’ll say there’s a lot more breadth in terms of the skills companies are looking for, and the roles they’re hiring for.

“There’s a lot more roles around data science and integration and APIs and connecting systems together, which is all part of the journey,” he said. “So, there’s a lot more data and technology roles. And certainly, when we talk to some of our customers about how they look at attracting underwriting talent, they want underwriters who are tech-savvy and who want to use technology. Our customers recognise that good data at the underwriting stage leads to better outcomes in terms of portfolio performance and they want the people who are buying into that link. They want people who see data as an advantage and not as a burden.”

Taking a tech-first approach to building a talent pipeline

For Send itself, Moss said, it’s clear that its tech-first approach is a key differentiator when it comes to the firm being able to attract top talent. Making the insurtech an employer of choice is a key area of focus for the team, as demonstrated by its appointment of Pat Caldwell as chief people officer after its most recent funding round.

Having the right culture, performance focus, remuneration packages and a healthy emphasis on diversity and inclusion are all critical to this, he said, because this is what talented individuals want from their place of work. This is especially relevant if you’re trying to attract new blood into an industry like insurance because it might not be what they were expecting from the insurance industry. Send is looking to really set itself apart from software incumbents by offering a new face to the insurance proposition.

“We’re trying to bring the startup feel that we have among our people to a wider audience,” he said. “And it currently isn’t all that prevalent in the insurance market. If you go into the fintech space or property-tech etc. there’s lots of industries that are chock full of startups and probably have a lot more maturity in terms of using technology. But it’s all part of that journey and we’re well on our way.”

An insatiable appetite for innovation, endless energy and a commitment to creating an internal team that reflects the rich diversity of the market they serve. These are the main ingredients in the recipe for developing a successful affinity insurance proposition, according to Phil Hobson (pictured), international affinity leader at Marsh and a long-standing advocate for the role of affinity products in augmenting customers’ experience of insurance.

When Hobson stepped into his current role in January 2021 – which meant moving his family from Hong Kong to the UK in the thick of the COVID crisis – his first port of call was to establish the broking giant’s affinity strategy which is focused on two core pillars. The first is the ambition to do a few things very well by taking a “narrow and deep” approach to building out the business.

“Narrow is our focus on our four core sectors of the business – automotive, equipment and consumer electronics, sharing economy and traditional sponsored programmes – and deep is the drivers that make us successful,” he said. “For us, those drivers are our talent, our technology, and our sales and marketing and placement.

“The second pillar of how we restructured our business was by looking at the very human capital heavy elements of our proposition and asking what we could do to digitise and how we could deliver our offering differently. So, that was my focus. I assumed the international role in 2021 which now includes 65 countries, seven regions and about 1,300 people across a very flat structure where everybody in the business is encouraged to be part of our affinity journey.”

What’s happening in the affinity insurance sector?

Assessing the lay of the affinity insurance landscape as it stands today, Hobson emphasised that “consolidation” is the word on the lips of many across the market. However, he noted that when discussing affinity, it’s important to be aligned on what that actually entails. Often, when people talk about becoming an affinity broker or carrier, they’re pursuing a one-to-one sales model. Real consolidation is where a client is tapping into a wider ecosystem to help acquire and retain its end customers.

How embedded insurance has evolved

Embedded insurance is lending itself naturally to these conversations, he said, and the discussion around embedded cover is changing as there’s increasing consideration about how it can be delivered as part of an ecosystem solution. Take, for example, an automotive manufacturer that supports a subscription base, who would have thought that people now automatically accept that this subscription includes insurance?

“There are so many examples of innovation across the consolidation model that I’m seeing in affinity business,” he said. “We’re looking at moving away from one-to-one acquisition and far more towards that embedded ecosystem solution. One-to-one acquisition still has its place because there are still products that require and support that model, with professional liability being one example.”

The consolidation currently happening in the market is taking place through carriers who can be truly global, he said, of which there aren’t all that many in the market. Clients are looking for a consistent customer experience across their embedded ecosystem and most carriers tend to be strong in one region, so it’s hard for them to deliver that consistency on a global basis. Meanwhile, many brokers are facing the same struggle.

Increasing engagement with service providers and partners

“The other thing I’m seeing, for us, is a lot more engagement in our ecosystem with service providers and partners,” he said. “That’s specialist technology providers, specialist education services, risk management services – and partnerships within our own organisation that allow us to tap into the wonderful insights and capabilities delivered by Oliver Wyman and Guy Carpenter.

“Another theme I’m seeing come through is the requirements of our core client – the affinity aggregator. They’re looking for far more than just remuneration, they’re looking for client retention and data insights. They’re looking for data. Data accessibility has been a challenge for them not just due to regulatory considerations but also just the way it has been collected in the past which has led to significant challenges around quality.”

Finally, he said, there’s a marked increase across the market for innovation. It’s easy to fall into the default position of conflating innovation with technology but, in reality, technology is just one piece of the innovation puzzle and serves as an enabler rather than the end goal.

“But that presents a wonderful challenge going forward and the opportunity for a lot of innovation,” he said. “For example, we’ve got products labs, we’ve started to invest in automotive engineers, data scientists and in more people with digital customer experience. And the way we’ve started to leverage that talent piece is by finding people from industry as opposed to finding people from the insurance industry.

“I’ve employed a lot of consultants and project managers and customer service people and people from sharing economy platforms and from the automotive sector. Because these are the people who can challenge the ‘norms’ in insurance and bring our product suite and capabilities far nearer to our clients’ ecosystems.”

What’s top of the agenda for Hobson and his team?

Looking across the full remit of the Marsh McLennan offering, Hobson said he feels “really blessed” to be part of an organisation with such incredibly diverse and endlessly accessible capabilities. It’s this which allows his team to really deliver innovation, he said, because there are always examples from other businesses to lean on and learn from – and to leverage for the benefit of clients.

With the year stretching ahead, he noted that there are several pressing items at the top of his agenda for 2024. First is firmly establishing what the team want the future of embedded insurance to be within Marsh, he said, because it represents such a huge opportunity – and that delineation will be critical going forward.

Secondly, is ensuring that the affinity team continues to really deliver on the data insights piece so critical to their clients. That’s especially important, he said, because the more and better quality data they get, the more it supports their insurance buying decisions and their risk management decisions – which is an element that should be considered by the industry more broadly.

“And finally, the third focus for me is always the same,” he said. “It’s about getting my brilliant team to the end of the year and making sure they have some fun and celebrate the great work they’re doing along the way.”

Malago Insurance Brokers (Malago), an insurance brokerage based in Bristol, has announced the acquisition of Mulberry Insurance Brokers (Mullberry), following the retirement of Keith Johnson, its principal.

“After more than 40 years, the bitter-sweet moment has arrived when I have decided to retire. It was not an easy decision as I have enjoyed my role so much,” said Johnson regarding his retirement.

“Building up relationships with my clients was crucial to me, and I was conscious to leave them in safe hands. With a similar client base and values, Mathew [Rowles, managing director at Malago] is just that,” he added.

“Having known Keith for many years, I am really pleased to add his customers to our growing portfolio. We will offer continuity to his client base: something that I know was very important to Keith when he was contemplating retirement,” said Rowles.

“Our values at Malago, and indeed our existing client base, bear strong similarities to Mulberry’s, so I am confident that we will be able to offer a seamless transition.”

In order to ensure a smooth transition, Johnson will join Malago to make sure that the needs of clients are being met..

“We will continue to offer service to Keith’s clients in the same way that they appreciated it from him: with an emphasis on the personal touch and getting to know each business and their owners,” said Rowles.

“Current clients of Mulberry Insurance Brokers can be assured that any current insurances will continue to run until renewal, at which point we will be in touch under the Malago brand,” he added.

Malago is an independent insurance brokerage specialising in commercial insurance. Its compliance firm is Momentum Broker Solutions, which is the same as Mulberry’s.