Insurance news

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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Earlier this year, the re/insurance market welcomed a first-of-its-kind innovation in the formation of CyberShock, a cyber catastrophe consortium. Created by Hiscox Re & ILS and Ariel Re, the new entity looks to provide up to $50 million in per-program capacity to support cyber insurers globally, and foster a healthier and more sustainable cyber insurance ecosystem.

Discussing the consortium’s launch, Conor Husbands (pictured), senior underwriter, cyber, at Hiscox Re & ILS, noted that it found its roots in addressing a long-standing challenge facing the cyber marketplace.

“On the one hand, there’s increasing demand from clients, from cedents, to transition their reinsurance purchasing from being on an aggregate basis to being on an occurrence basis,” he said. “On the other hand, there’s really no suitable products available to cater to that. Our belief, and Ariel’s belief, is that the existing product suite and existing attempts at addressing the demand are not yet fit for purpose. We’ve wanted to address that for some time.”

Husbands highlighted how Hiscox and Ariel share a strong cyber pedigree, with the former having written non-proportional cyber products of all kinds for a decade now, as one of the first markets to launch its cyber product suite in 2014. In addition, he said, Hiscox developed the market’s first cyber ILW (Industry Loss Warranty) product and first parametric transaction.

Meanwhile, he said, from early conversations with Ariel, it became apparent that the business was already at a very advanced stage of developing the contract language at the heart of the CyberShock wording so the alignment of ambition between the firms was clear from the offset. Ariel had already started putting pen to paper in terms of developing the product and, like Hiscox, they proved willing to back the product with significant capacity.

“We think that’s going to be crucial in getting traction with clients,” he said. “Our combined capacity offering for this is $50 million per programme which, in the context of cyber insurance, is a really meaningful amount.”

The final piece of the puzzle for Husbands and his team was the calibre of the Ariel team – who bring an extensive background in cybersecurity and a strong grasp of the underlying risk of this peril.

Who does CyberShock target?

On the rollout of CyberShock, Husbands highlighted that it is designed for global writers of affirmative cyber. It offers up to five bespoke heads of coverage, though clients can tailor that to the needs of their portfolio, he said, and it’s designed to protect clients against a wide range of cyber-specific perils.

 “By designing it like that, we hope that we can absorb the main catastrophic risks, which could impact their portfolio,” he said. “So that includes software service or hardware supply chain disruption, malware propagation, the widespread exploitation of a zero-day vulnerability and cloud outages, among a number of other things. We’re really trying to identify the core cyber risks that clients face, and to provide a product which enables them to transfer them.”

For Hiscox and Ariel, the strongest selling point of the product – and a core reason behind its creation – is the certainty of coverage it can offer the market. For some time in the excess of loss cyber marketplace, Hiscox has seen a lot of attempts to shoehorn casualty style language into a cyber product, he said, which it feels introduces very significant ambiguities into the functioning of the product. That, in turn, risks leaving it quite open-ended as to which perils are and are not covered, and also how losses get aggregated into the treaty.

“It’s really important to us that clients, as well as reinsurers, aren’t faced with the threat of a costly dispute over coverage after a loss,” he said. “They have to know exactly when the protection we offer will respond or won’t respond. That’s what we’re trying to achieve with CyberShock. There’s a big difference in our minds between loose language and broad coverage. And we’re trying to avoid the former and provide the latter.”

While that certainty of coverage element is the main selling point of the product, not least because of the question it raises as to how some other occurrence products in the marketplace would respond to a major event, Husbands noted that there is a range of benefits from this consortium for multiple stakeholders.

For example, he said, the excess points the product is capable of supporting are much lower than in traditional aggregate products – which often see retentions significantly greater than 100% of gross income. By contrast, CyberShock ensures that clients could, in principle, recover from the product without being in a net loss-making position because the consortium is willing to entertain somewhat lower retentions – an important selling point for clients concerned about retentions.

The hope is that CyberShock will help grow the market, Husbands said, by attracting more buyers and enabling more clients to transfer some of the risks which could be borne by the reinsurance marketplace.

The 2024 Atlantic hurricane season is projected to be one of the most active on record, according to forecasts from MS Amlin and Acrisure Re.

MS Amlin, a specialist Lloyd’s of London insurer, and Acrisure Re, the reinsurance division of global fintech leader Acrisure, have both released predictions highlighting a significant increase in storm activity.

MS Amlin’s forecast, which aggregates over 20 separate forecasts, predicts a “substantially above average” number of storms between June and November. The consensus suggests an average of 23 named storms, 11 hurricanes, and five major hurricanes.

Accumulated Cyclone Energy (ACE), a measure of overall hurricane activity, is forecast to reach 204, significantly above the long-term average of 123. The heightened activity is attributed to the development of La Niña conditions in the Pacific and unusually warm sea surface temperatures in the North Atlantic and the Gulf of Mexico.

Dr Ed Pope, a geoscientist in MS Amlin’s exposure management team, noted that predictions point to a potentially active hurricane season in 2024, with some agencies forecasting record levels of activity.

“Importantly, there has been general consensus in those forecasts for a number of months now about potential activity, despite the uncertainties associated with making forecasts early in the year. Even if we hit the low end of these forecasts we are likely to see an above-average season,” Pope said.

Simon Morgan, head of property at MS Amlin, also noted that hurricane-related economic losses have soared by $22 billion per decade since 1990 due to population growth and increasing coastal development.

“The insurance industry can help people and businesses to absorb climate blows, but only if pricing adequately reflects the escalating risks of stronger, more destructive hurricanes in a warming world. Investing in sophisticated catastrophe modelling and research will be increasingly important if the industry is to properly understand and prudently price risks,” Morgan said.

Beyond 2024, the firm noted that climate change is worsening hurricane risk in the long term, with hurricanes likely to increase in intensity, produce heavier rainfall, and have storm surges penetrating further inland. Pope added that the frequency of the strongest storms, Category 4 and above, is expected to increase, leading to more cumulative losses for insurers and a need for communities to focus on climate adaptation measures.

The 2023 hurricane season saw 20 named storms, seven hurricanes, and three major hurricanes.

Acrisure Re forecast for 2024 hurricane season

Acrisure Re’s forecast, meanwhile, also indicates a “very active” hurricane season. The company’s annual Pre-Season Hurricane Outlook attributes the increased activity to a rise in sea surface temperatures, a weaker La Niña weather phase, and conditions similar to past active seasons.

Acrisure Re’s analytics team examined variables such as forecasted Atlantic sea surface temperatures, the El Niño Southern Oscillation (ENSO), and the Quasi-Biennial Oscillation (QBO) to create a qualitative overview of the likely conditions.

Simon Hedley, CEO of Acrisure Re, commented on the greater certainty of an active 2024 hurricane season compared to the previous year.

“Our expert analytics and modelling teams are dedicated to staying abreast of developments, ensuring our brokers are fully equipped to offer the best advice to our clients,” Hedley said.

Ming Li, partner and global head of catastrophe modelling at Acrisure Re, also noted that the synchronizing forces in the Atlantic basin, including above-average sea surface temperatures and the predicted development of La Niña conditions, are likely to spur higher activity. However, the exact impact of this increased activity remains to be seen.

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Gallagher Re has announced that Brian Flasinski (pictured) will assume the role of chief executive officer (CEO) for the North American region on June 1, 2024, succeeding Jim Bradshaw. The transition follows the company’s earlier announcement in March, which also detailed Bradshaw’s move to the position of chairman, Gallagher Re North America, effective the same date.

Bradshaw, who became CEO of Gallagher Re North America in 2021 following the acquisition of Willis Re, will take over from Tom Wafer, who is set to retire on May 31, 2024. In a statement, it was noted that Bradshaw has had a distinguished career in the re/insurance industry, with over 40 years of experience. His tenure at Willis Re began in 2005, eventually leading to his promotion to CEO of its North American business in 2010.

Who is Brian Flasinski?

Flasinski joined Gallagher Re in 2015, having previously served as executive vice president and North American sales leader. His prior experience includes a nine-year stint as senior vice president at Guy Carpenter. In a news release, Flasinski’s leadership in sales was described as pivotal in energizing Gallagher Re’s new sales initiatives and delivering substantial value to clients.

Gallagher Re CEO Tom Wakefield expressed confidence in the leadership changes, highlighting the firm’s ongoing success and client-focused approach.

“Gallagher Re North America is a story of continuing success built on an unwavering focus on our clients. I am confident we will quickly build upon our accomplishments and continue to accelerate our growth,” Wakefield said.

Wakefield also acknowledged Bradshaw’s significant contributions during his tenure, particularly in navigating the Willis Re acquisition and driving substantial growth.

“Jim’s leadership helped us navigate through the Willis Re acquisition and achieve remarkable growth during his tenure. I am grateful for his continued support, guidance, and counsel during the transition and beyond,” he added.

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Howden Re has reported a moderation in pricing within the property-catastrophe reinsurance market, following rate increases in 2022 and 2023.

The average risk-adjusted property-catastrophe reinsurance rates-on-line was 5% lower than usual – typically ranging from -7.5% to -2.5%, it stated.

According to its report, the reinsurance market has been facing a period of adjustment, partly caused by resurging dedicated sector capital that exceeded the levels seen in 2021 along with strong ILS inflows. This led to an increase in capacity at the top of programmes, leading to risk-adjusted rate reductions in the higher layers.

“It is crucial that our clients secure optimal coverage in this rapidly evolving landscape. This means not only finding capacity, but also ensuring it aligns with their risk profiles and financial objectives,” said Howden Re head of North America Wade Gulbransen.

“Our focus remains on providing innovative thinking alongside dynamic placement strategies to meet these challenges head-on,” he added.

The report noted an increase in activity and competition in the ILS market. As larger carriers in Florida were more active in the issuance of catastrophe bonds, the supply in higher layers increased and led to the significant growth of the assets under management of capital providers.

A shift in focus on property risks by some reinsurers followed the strong performance seen in 2023 as there were several reinsurers that reported some of the best financial results that they had experienced in decades, with regards to combined ratio, return on equity, and economic value added.

This increase in ILS interest reflected a trend in the broader market when it comes to diversified alternative risk transfer mechanisms, which offered reinsurers and cedents more options in managing their exposures.

However, factors such as the 2024 hurricane season can exert short-term rating pressure on the market as the weakening El Niño and the heightened chance of La Niña occurring may entail stronger storms, thereby underscoring the inherent market volatility as well as the need for more strategic resilience.

“The reinsurance market is at a critical juncture. While the recovery of dedicated capital and increased capacity signal a potential softening of rates, the forecasted active hurricane season and other market pressures could counteract these trends. Strategic adaptability and expert guidance are essential in navigating these dynamics,” said Howden Re head of industry and strategic advisory David Flandro.

Howden Re is the reinsurance and strategic advisory arm of Howden.

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Specialist reinsurance broker Miller has announced its acquisition of Bruzon Correduría de Seguros y Reaseguros S.A. and Bruzon Services S.A. (Bruzon), a commercial insurance and reinsurance broker based in Madrid.

The transaction is part of the Miller’s continued expansion of its specialty boutique model. Miller CEO James Hands expressed his enthusiasm for the deal.

“This is an exciting time for Miller as we continue to expand our presence across the UK, Europe and Asia. Bruzon has an outstanding reputation in Spain and shares our vision to create the broker of choice for clients with complex risk-transfer needs and for talented brokers to pursue their passion,” said Hands.

“Together we can broaden the spectrum of solutions and services available to our global clients,” he added.

With the acquisition, Bruzon will rebrand to “Bruzon Miller”, which acknowledges the partnership between the two firms as Miller has been a minority shareholder since before 2015. Bruzon’s staff will still be led by Bruzon founder, chairman, and CEO John Bruzon. They will be collaborating with Miller’s staff from the UK, Asia, and Bermuda as well as the broker’s European insurance markets which include France, Belgium, and Switzerland. 

“We are delighted to join Miller as the next step of Bruzon’s journey. This transaction will advance our own presence in the Spanish market, continuing to provide our clients excellent advice, solutions and service,” said Bruzon.

“With Miller’s ownership and increased resources, we preserve the legacy and strengthen the special character of our company,” he added.

Bruzon is one of the leading insurance and reinsurance brokers in Spain. With its clients being large banks, insurance firms, large corporates and IBEX 35 members, the broker offers solutions in facultative reinsurance, accident & health, sports, financial lines, and credit and surety insurance. Meanwhile, boutique consultancy firm Bruzon Services is focused on financial advisory and structuring. 

With its completion expected to occur sometime this year while being subject to regulatory approvals, Miller’s transaction with Bruzon serves as the broker’s second acquisition in Europe. 

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In his role as partner and global insurance leader at PwC, Jim Bichard (pictured) oversees a team of some 15,000 professionals serving insurance clients across 100-plus countries on a daily basis. It’s a role that has helped him develop a unique point of view of how the sector has evolved, where it stands today – and what the future holds for the insurance market.

Digging into some of the key pain points he sees facing insurance businesses, Bichard looked to PwC’s most recent ‘Insurance Banana Skins’ report and its finding that insurance companies are being exposed to a plethora of macro-economic and geopolitical risks.

What’s pressing on insurance companies today?

Interest rates, inflation and geopolitical conflict are just some of the risks having either first or second order impacts on insurance companies today, he said. Meanwhile, as part of a regulated sector, insurance companies are grappling with increasing complexity.

“Technological disruption and climate change are risks that continue to move up the register,” he said. “Scenarios such as cyber are creating risks; and given the amount of reliance on data across the whole of the insurance market, it’s no surprise that data protection and cyber is high on the agenda.

“Climate is a risk that continues to grow and grow in terms of its impact on the operations of an insurer, its balance sheet, the products it creates and distributes, and the investments that it holds. It’s very pervasive.”

The other challenge that PwC is championing greater understanding of across the market, is the trust gap that exists in today’s insurance ecosystem. A core part of the insurance offering is the need for insurance companies to be trusted and resilient, he said, and crucially, to make good on the implicit promise of insurance – that it will be there for customers in their hour of need.

“Generally speaking, trust in financial services hit a really low level during the pandemic. So, the insurance industry has a lot of work to do to improve trust among the public and its customers,” he said. “It’s hard to assess this risk without looking at the impact of digital and AI which is impacting all parts of the operations of insurance companies.

“Part of that is around customer preferences and the fact that these are changing really rapidly. Individuals and corporate customers are used to being able to access other areas of financial services digitally. They are also now raising questions about why insurance is a one-year product, about the potential for usage rather than loss-based products, and about why insurance hasn’t moved to be more preventative and protective.”

Balancing performance with navigating external market conditions

Bichard highlighted that, overlaid across all these factors is an emphasis on performance.

Insurers have got to remain profitable, and ensure that premiums exceed their claims, he said, which is no mean feat in today’s environment. Performance across the global sector has been quite tough, certainly up until last year, so these companies are facing juggling those performance demands and meeting their investors’ requirements while dealing with macro factors, some of which are manifesting now and some of which are poised to be even greater challenges down the line.

“We do a CEO survey every year, and one of the most interesting questions posed is whether they think their business will be viable or sustainable in five-to-10-years time,” he said. “This year, we had a record response of 45% of CEOs saying they do not think their business will still be viable in five to 10 years. And that’s just as high for insurance as for any other sector. So, what does that look like? Because five years is not a long time in which to reinvent your business.”

How have the challenges facing insurers evolved?

Having started in insurance in the mid-90s, Bichard has seen for himself how the challenges facing the market have – and haven’t – evolved over the years. What is clear, he said, is that the surrounding risk landscape has never been quite as complex as it is today. Whether that’s translating into increased riskiness is hard to say for certain, but there is certainly more complexity.

A large part of this is due to the new risks which have emerged over the last decade, he said – the increasing complexity of the market is making accurately pricing risk harder than ever.

“That pace of change is only accelerating,” he said. “It calls to mind that quote about how digital technology has never been as fast, and will never be this slow again! We’re really only just wrapping our heads around the fact that we’re in a surge right now and, until that calms down, the industry is going to get more and more disrupted.”

Insurance, in theory, has always been a data-driven industry, he said, as it involves looking at historical performance or loss experiences and using that to price risks, and effectively predict the future. The computing power and the availability of data and, as a result, insurers’ ability to model and run simulations is now in a completely different space, with things that would otherwise have taken months or years to do, now happening almost instantly.

“Interestingly, it hasn’t made us significantly more profitable,” he said. “The industry is not, as a result, in a position where it never has a loss-making year because competition is still there. But data and the ability to use analytics and modelling and computing power – and particularly how Cloud is really just starting to have an impact on that – is an important consideration.”

Jobs will be optional for humans in a “benign” AI future imagined by Elon Musk.

The Tesla CEO, who spoke at the Viva Technology 2024, told the audience that that future is the most likely scenario with artificial intelligence.

“In a benign scenario… probably none of us will have a job,” Musk said, who spoke to the audience remotely via webcam. “Any job that somebody does will be optional.”

In this scenario, he said there will be universal high income, while AI and robots will provide any goods and services for the public.

“If you want to do a job as kind of like a hobby, you can do a job,” Musk stated. “But otherwise, the AI and the robots will provide any goods and services that you want.”

According to Musk, the question in the benign future will be the role of humans given that computers and robots will be able to everything that they can.

“I do think there is perhaps still a role for humans in this in that we may give AI meaning,” he said.