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The rapid rise of artificial intelligence (AI) is reshaping the landscape of the telecommunication, media, and technology industries. The launch of ChatGPT and other large language models has accelerated the use of AI applications.

However, the popularity of AI has led to greater energy requirements, especially for AI-focused data centres, which require significantly more power than traditional ones. At the same time, telecom companies are facing challenges in expanding networks to support AI, requiring significant investment in fibre optics and infrastructure.

“The increased energy utilisation that an AI-focused data centre requires is massive – as much as a small city,” said George Haitsch (pictured right), technology, media and telecommunications industry division leader at WTW.

“It’s significantly greater than typical data centres have been in the past. Major AI providers like Microsoft, Apple and Google need to quickly pivot to have greater capacity to support the utilisation of the tools that they’ve been rolling out.”

Energy and telecom infrastructure demand climbing

The issue has spurred renewed interest in nuclear energy as a viable power source, said Haitsch, with discussions now focusing on small mobile nuclear reactors to meet the immense energy needs of these facilities.

Experts have noted concerns that telecom companies may struggle to keep up amid growing demand for AI and machine learning technologies.

Firms are leveraging solutions like network slicing and edge computing to close this gap, but companies’ investment levels vary, according to Jose Mercado (pictured left), telecommunications subsector leader for North America and Latin America at WTW.

“Telecom companies are working diligently to address these issues, focusing on expanding their networks to support advanced technologies,” Mercado told Insurance Business. “This includes upgrading transport networks, enhancing fibre optic infrastructure, and integrating high-tech systems to meet growing demands.”

“There are existing solutions, but their effectiveness largely depends on each carrier’s business model,” Mercardo noted.

For example, he said, network slicing protocols allow carriers to segment their networks for different services and markets. Additionally, edge computing and cloud-based services help address capacity gaps.

Many carriers are also forming partnerships with major cloud providers to enhance their capabilities. Edge computing is particularly valuable for supporting the Internet of Things (IoT) as it provides reliable computing resources.

Risks and exposures as telecom firms expand to meet AI usage demands

This rapid expansion to meet the growing demand posed by AI involves substantial costs and raises various liabilities for telecom firms. Mercado stressed the importance of proper network management and investment to bridge gaps, which insurance can also play a role in.

“Liabilities are rapidly increasing for telecom companies, with cyber risk being a significant concern,” said Mercado. “As they expand into remote or hazardous areas, insurance can help manage these risks. Business interruption is also a concern, as it can greatly impact profits and earnings, making it especially important for capital-intensive telecom operations.”

Despite the challenges, there is a strong sense of enthusiasm and proactive investment in this sector.

“The industry is clearly excited about the opportunities AI presents,” said Haitsch. “It has been expanding its capacity aggressively, moving from 3G and 4G to 5G and now looking ahead to 6G.”

In the US, the Broadband Equity and Deployment (BEAD) program has introduced $42 billion in investment to expand high-speed internet in underserved areas. The initiative, which WTW is actively supporting with insurance and surety solutions, underscores the telecom industry and the government’s joint commitment to advancing communication infrastructure and bridging digital divides.

Haitsch highlighted the “growth opportunities” ahead, and the role of insurance in facilitating telecom investments.

“Insurance is a hedge, a risk financing tool, that can help smooth out the edges and ensure (telecom firms) can proceed with confidence in terms of the investment and the construction that’s going to be required,” said Haitsch. “We’re excited to be a partner to the telecommunications industry, and we’re seeing a lot of interaction and excitement around managing the challenges.”

What are your thoughts on the increase in telecom infrastructure and energy demands due to AI? Please sound off in the comments.

Gallagher Specialty has released its latest market update, focusing on global macroeconomic challenges and their effects on risks faced by those trading with or investing in emerging markets.

The report also provides an overview of the structured credit and political risk (SCPR) insurance market, noting changes in capacity and key market developments.

The report highlights geopolitical tensions, including ongoing conflicts in Ukraine and the Middle East, which continue to impact global markets. Gallagher Specialty points to the upcoming US election in November as a potential turning point, with the outcome expected to have significant implications for Ukraine, trade with China, and Western diplomacy in Africa.

The SCPR insurance market remains crucial in supporting trade and investment amid this volatile environment.

SCPR across emerging markets

In the Democratic Republic of the Congo (DRC), the escalating conflict in the east of the country is increasing risks for investors, particularly in the mining sector. Gallagher Specialty reports that the involvement of regional forces is disrupting mining operations and supply routes, which could impact investor confidence and government revenue.

Despite the instability, global demand for critical minerals is expected to sustain investor interest in the DRC.

Kenya is also facing economic pressures, exacerbated by extreme weather and supply chain disruptions. According to Gallagher Specialty, the country’s government has limited fiscal space to offer reconstruction funding, which has led to increased reliance on external support.

While Kenya’s recent Eurobond buyback has alleviated immediate concerns about sovereign default, debt sustainability remains a longer-term challenge.

In Gabon, political stability has improved since the August 2023 coup, with the military authorities committed to a democratic transition by 2025. Gallagher Specialty notes that while this transition has led to the resumption of external budgetary support, any delays could negatively impact investor confidence and lead to social unrest.

The government’s efforts to reduce external debt have also been noted as a positive step towards improving the country’s economic outlook.

Algeria is expected to hold presidential elections in September 2024, with President Abdelmajid Tebboune likely to remain in power. Gallagher Specialty highlights the country’s ongoing economic challenges, including inflation and unemployment, which may continue to affect foreign investment.

Algeria’s reliance on hydrocarbons remains a key vulnerability, particularly amid restricted oil production.

In Ghana, the approach of the December 2024 general election is raising the risk of civil unrest and political violence. Gallagher Specialty reports that confrontations between rival party supporters are likely as the election nears, and public distrust in electoral institutions is growing.

However, recent debt restructuring agreements and renewed IMF support have improved Ghana’s fiscal stability and debt sustainability outlook.

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The global construction insurance market is seeing a notable increase in capacity levels, approaching those seen in 2019 during the last soft market cycle, according to a report from WTW.

This upward trend in capacity is forecasted to continue through the second half of 2024 and into 2025, driven by insurers’ focus on maximising local capacity and pressure from new market entrants seeking to gain a foothold.

Key drivers of the market include growth in infrastructure projects, pricing stability, and opportunities emerging from coverage gaps.

Global construction insurance sector growth

The report highlighted sector growth in construction, particularly in energy, utilities, and infrastructure projects, which are expected to increase by 7.8% and 5.1%, respectively, in 2024.

A significant rise in manufacturing investments is also anticipated, especially in semiconductor plants, gigafactories, and data centres across North America, Latin America, and Europe.

Global construction insurance pricing

Despite inflation and higher interest rates, pricing in most regions and lines of business is expected to remain stable due to increased competition and new market entrants.

However, in regions prone to natural disasters – such as the Gulf of Mexico, the US East Coast, and parts of Latin America and Asia – pricing and capacity are still being carefully managed due to the elevated risk.

Emerging opportunities for the global construction insurance market

The soft market is also presenting opportunities for insurers to address coverage gaps, such as complex construction risks and professional liability coverage in large infrastructure projects, particularly in Europe, Asia, Australia, and New Zealand.

In the US, new opportunities may arise in auto liability and lead umbrella casualty lines.

Impacts of politics on global construction insurance market

Political uncertainty, particularly elections, has led to delays in major investment decisions in the construction sector.

However, WTW anticipates that large infrastructure projects, especially in the UK and European Union, will gain momentum heading into 2025.

Tech innovation in global construction insurance market

Technological innovation is another area driving growth.

The construction industry is increasingly investing in technology solutions, such as artificial intelligence (AI), robotics, and drones, to enhance productivity and address labour shortages.

Global construction insurance market outlook

Iain Drennan, head of construction for Australia and New Zealand at WTW, said all indicators point to a positive market outlook.

“The resilience of the construction insurance market continues to impress in the face of persistent economic headwinds, and contractors are finding innovative ways to manage risk,” he said.

Michael Bruch, global head of risk advisory services at Allianz Commercial, said the use of mass timber in construction has been expanding, particularly in high-rise buildings.

The material offers environmental benefits by reducing the industry’s carbon footprint, but it also introduces new risks, including fire hazards and vulnerabilities to natural disasters.

Bruch highlighted the growing use of mass timber in Europe, Asia, and North America, emphasising the importance of fire-resistant design and careful risk management when incorporating this material into large-scale projects.

Aon has released its “Ultimate Guide to the Reinsurance Renewal – September 2024” report, highlighting the contrast between the strong financial results of the reinsurance industry and the challenges faced by insurers amid rising losses and more complex risks.

The report emphasizes the industry’s potential for growth, noting that the global insurance premium to gross domestic product (GDP) ratio has remained around 1.8% since 2010. This is despite an increase in exposures and unmet client demand, signaling potential areas for expansion.

In the first half of 2024, natural catastrophe re/insurance payouts totaled $58 billion, significantly higher than the decadal average of $47 billion. Despite these payouts, reinsurers recorded an average return on equity (ROE) of 17.6% during the same period.

Aon’s analysis of 100 global re/insurers found that some of the largest players reported ROEs exceeding 25%, outperforming many primary insurers and surpassing their own cost of capital. This strong financial performance could drive further growth.

However, the report points to uneven profitability across the insurance value chain. Higher retentions in insurers’ catastrophe programs have limited capacity for frequency covers, leading to an unequal distribution of underwriting profits.

Global reinsurer capital reached a record $695 billion as of June 30, 2024, an increase of $25 billion from the end of 2023. This rise was mainly driven by retained earnings, increased inflows into the catastrophe bond market, and recovering asset values.

A survey of re/insurers showed average annualized investment yields of 3.8% in the first half of 2024, up from 3.1% in the previous year.

Reinsurance pricing has begun to decrease gradually in 2024, partly due to a rise in alternative capital, which reached $110 billion. Reinsurers have also granted rate reductions for top-performing risks. Aon predicts that competition in pricing will increase in 2025, giving insurers more flexibility in terms of capacity and coverage.

Rupert Moore (pictured above), UK CEO of Reinsurance Solutions for Aon, commented that the reinsurance market must take a more proactive role in managing frequency losses and earnings volatility. If reinsurers continue to avoid risk, insurers may follow suit, shrinking the industry’s relevance.

Moore stated that Aon’s role is to bring clarity and confidence to risk management, helping to shape better decisions and highlight opportunities for profitable growth.

The report also highlights the volatility experienced by re/insurers in 2024, driven by diverse events such as earthquakes and airline losses in Japan, the Baltimore bridge collapse in the US, severe flooding in Dubai, and a global computer outage at CrowdStrike.

According to Moore, these events underline recurring themes for the industry, including the increasing interconnectivity of risks, loss volatility, and the growing gap between insured and economic losses.

The industry must either adapt to the opportunities presented by shifting risks or risk seeing a greater portion of that risk absorbed by the public sector and capital markets.

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Digital platform CatX has announced the appointment of Jon Wood as the head of origination.

CatX co-founder and CTO Lucas Schneider said that Wood’s more than two decades of experience will be helpful to the firm’s operations.

“With over 20 years in the industry, Jon will help us to secure attractive opportunities for our funds and accelerate the flow of alternative capital into insurance,” said Schneider.

Benedict Altier, co-founder and CEO of CatX said Wood’s appointment coincides with the firm facing interest from new capital sources.

“Jon’s leadership will be key in driving our strategy and helping us to better connect risk with new capital,” said Altier.

Who is Jon Wood?

Wood has more than 20 years of experience within the industry, with his most recent role being in Aon’s retrocession leadership team where he had helped in shaping and executing the company’s global strategy as well as drive high-value transactions throughout the international reinsurance market.

Before Aon, Wood also had senior positions in various firms like Willis Re and Guy Carpenter. He has experience when it comes to client executive and production roles where he has provided his expertise in traditional and alternative risk transfer solutions.

In his new role, Wood will be working with the reinsurance, retrocession, and global corporate broking teams of the firm in order to best leverage the capital that is available through the platform for their clients.

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Small- and medium-sized businesses (SMBs) represented about 45% of the cyber market exposure, a study by Guy Carpenter found.

In its latest cyber research report entitled “Small Businesses and the New Frontier of Cyber Catastrophe Modeling,” which was from its Cyber Center of Excellence, it was found that the number of SMBs recorded for cyber market exposure was a notable increase of 45% over the last five years.

The study said that the increased share of SMBs in the cyber insurance market meant that the accurate quantification of their aggregation potential was important to the capacity deployment as well as risk management.

In contrast to the overall SMB segment, the report found that those with cyber insurance coverage had strong security postures. This meant that incorporating the security posture gap into cyber modeling analysis is vital to accurately quantify the appropriate aggregation risk for the portfolio.

However, because there is a notable lack in credible data, cyber catastrophe (CAT) models struggled in reflecting the disparities of cybersecurity postures when it comes to SMBs.

As the adjustment of CAT model outputs in order to reflect the impacts of fundamental security controls leads to a more accurate and precise differentiation of SMB risk, model adjustment serves as an important step when it comes to establishing a view of modeled loss potential, which can support the growth in a market segment that is set for a continued expansion.

The “Small Businesses and the New Frontier of Cyber Catastrophe Modeling” report was developed by cyber insurance provider At-Bay and discussed the impact of cyber on SMBs, suggesting actionable solutions when it comes to modeling, data, and impact mitigation.

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Global property and casualty reinsurers were found to have strong earnings that had solid premium and investment income growth, a report by Morningstar DBRS found.

According to the report, the growth had largely benefitted from the continuous favourable pricing and interest rate environment. The report said that all of the selected global top P&C reinsurance firms saw significant net income growth during H1 2024 compared to what was recorded in the previous year except for SCOR S.E. and PartnerRe Ltd.

From the $10.3 billion recorded in H1 2023, the total aggregated net income for the same period this year has seen a 25% year-over-year increase, to a total of $12.9 billion. Notably, H1 2024 was said to be one of the costliest half years for natural catastrophe losses within the last 10 years. Despite this finding, there were a select few among reinsurers that maintained their high profitability with disciplined underwriting.

Selected Bermuda-domiciled reinsurers continued to have strong contributions to their aggregated net income even if there was a slight slowdown in the growth of the performances of underwriting and investments. Even though SCOR saw a loss during H1 2024 because of the assumption review made by its Life & Health reinsurance business, its P&C reinsurance business still reported growth.

Some reinsurers said that they experienced low natural catastrophe losses in the first quarter of 2024. However, the frequent mid-sized natural disasters that happened in Q2 2024 led to a higher but still low average combined ratio for the group which was relative to H1 2023.  It was also believed that natural catastrophe losses will increase in H2 2024.

Meanwhile, with the current high-interest-rate environment, global reinsurers continued to receive benefits since they typically reinvested their maturing securities into higher-yielding securities while maintaining a similar risk profile.

The report’s outlook for the global P&C reinsurance market continues to be positive even with the high natural catastrophe losses as well as the likely lower interest rates all around the world.

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AM Best has affirmed the financial strength rating and the long-term issuer credit ratings of Axis Capital Holdings Ltd’s operating subsidiaries, which was A (Excellent) and “a+” (Excellent) respectively.

The credit rating agency also affirmed its long-term ICR, which was “bbb+” (Good) as well as the indicative long-term issue credit ratings of the parent company. These ratings were affirmed for Axis Specialty Ltd, Axis Re SE, Axis Reinsurance Company, Axis Specialty Europe SE, Axis Surplus Insurance Company, and Axis Insurance Company.

“The group’s balance sheet strength assessment is supported by financial flexibility at the holding company level and within the operating subsidiaries, while also reflecting capital management strategies that have included consistent common and preferred dividends, as well as share repurchases,” the ratings agency stated.

It further said that in late 2023, the firm had strengthened the reserves on its casualty book following an evaluation and review of claims for accident years of 2017 to 2022, which were impacted by the higher social and economic inflation that was not anticipated.

“However, prior to 2023, Axis had reported favourable reserve development for about nine of the past ten years, testament to the company’s reserving controls efficiency. Financial leverage is elevated when compared with its peers but remains largely in line with the company’s expectations,” said AM Best.

AM Best rated the firm’s operating performance as adequate because its underwriting results over the last five years were volatile. However, it also said that the corrective measures that were implemented in the last two years in order to mitigate volatility like leaving the property-catastrophe reinsurance business led to more stable earnings.

“These changes have favourably impacted profitably measures with the group’s loss and combined ratios improving significantly,” said AM Best.

Axis’ business profile was also assessed as favourable because of how the group was consistently part of the credit rating agency’s Global Reinsurance 50 largest reinsurance enterprises as well as its excess and surplus ranking.

“The group’s ERM is sophisticated and embedded throughout the organisation. AM Best believes that Axis’ risk management is appropriate given its complex risk profile,” said the credit rating agency.

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Gallagher has announced the appointment of Bruce Dettling (pictured) as global head of mining and heavy industry, a newly established role aimed at strengthening the company’s global specialist practice in this sector.

Dettling will officially join Gallagher in November and will report to Malcolm Payton, CEO of property and casualty insurance solutions and head of global fac at Gallagher Specialty.

Dettling brings over 20 years of senior-level broking experience to Gallagher, having most recently served as head of mining at Aon in London. His career includes positions at Lloyd & Partners and Marsh, where he specialized in mining and associated industries, as well as property and casualty broking.

Gallagher highlighted that its mining and heavy industry sector specialists provide support to companies of all sizes with their operations, projects, and investments worldwide.

The mining sector faces a variety of risks, including natural catastrophes, machinery breakdowns, environmental and transportation hazards, and financial risks. Gallagher’s client base spans 25 different commodities, and the team offers extensive industry-specific expertise.

Payton stated that Dettling will be an excellent leader for the global mining team. He also noted that Dettling’s extensive experience and strong client relationships align well with Gallagher’s approach and will further reinforce the company’s expertise in the mining and heavy industry sectors.

Gallagher’s last high-profile appointment came in July, when the global financial services giant named Richard Harries to its board of directors, bringing in a seasoned professional with over 35 years of insurance sector experience.

Harries’ extensive career spans various senior roles across the UK and other heavily regulated markets. Notably, he previously served as chief executive, chief underwriting officer, and energy underwriter at Atrium Underwriters Limited. His tenure at Willis Faber & Dumas saw Harries in significant positions within the energy sector.

In other developments, Gallagher also recently published its financial results for the second quarter of 2024 – a period described by chair and chief executive J. Patrick Gallagher, Jr. as excellent.

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About six in 10 firms are reporting a decline in employee engagement in using hybrid work models.

A survey by Zoom found that 84% of organizations in the Asia Pacific have either a hybrid or remote working model.

Encouragingly, 83% of employees said that they are most productive in hybrid settings. And 87% of leaders in APAC considered increasing productivity to be the biggest consideration when determining the best working style for their company.

However, six in 10 leaders report a decline in employee engagement due to this approach, found the survey of more than 600 IT and C-suite leaders and nearly 1,900 knowledge workers across the globe, including 604 in APAC.

“Workplace flexibility is not only becoming increasingly commonplace in the APAC region, but more diverse in itself — ranging from flextime to location, role, and even rotation-based models,” noted Ricky Kapur, head of Asia Pacific, Zoom.

“Leaders today are faced with a new challenge of finding the best-fit hybrid model while keeping up with the evolving expectations of a multi-generational workforce and the impact of rapidly advancing technologies like AI.”

Generative AI ‘makes it easier to do my job’

A majority of employees (81%) agree that the tools and technology their organisation currently uses for remote work needs improving, highest among the other regions surveyed, found Zoom.

And organisations are already seeing the benefits of incorporating AI: 85% of APAC leaders believe that generative AI has made their workforce more productive, while 69% of employees in the region strongly or slightly agree that “generative AI makes it easier to do my job.”

However, significant barriers to generative AI adoption for employees in APAC still remain:

• 70% believe that generative AI has a high learning curve.
• 63% are not yet comfortable with generative AI.
• 55% are concerned that generative AI will negatively impact their job/position.

“While our study shows that APAC leaders generally recognise the productivity benefits that adopting AI at work can bring to their teams, many are not utilising AI to their full potential. As organisations seek to reduce friction in the transition to hybrid ways of working, AI is a critical tool at their disposal to help employees collaborate better and feel more connected to each other,” said Kapur.

“Beyond direct productivity benefits, leaders should look toward exploring more AI use cases to engage, inform, and connect employees. This will be key to building and maintaining company culture amidst changing workplace dynamics,” he said further.