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

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

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

The role of insurance in a GenAI-equipped future

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

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

Understanding the ‘addictive’ nature of new technologies

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

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

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

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

How insurance companies can equip themselves for the future

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

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

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

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

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

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

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

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

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

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

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

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

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

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The family of Paula Leeson, a deceased heiress who drowned in a swimming pool, has called on a judge to rule that she was murdered in order to prevent her husband, Donald McPherson, from receiving an inheritance from her £4.4 million will, as reported in an article by Express&Star.com

McPherson, a property developer, has denied murdering his wife and was not found guilty by a judge who stated that there was not enough evidence to guarantee a safe conviction. However, Leeson’s family want a judge to rule that McPherson had killed her so that he will not be legally entitled to benefit from the will.

Prior to Leeson’s death, McPherson took out seven “secret” life insurance policies on her, which would have been worth £3.5 million if she died, Express&Star.com reported.

However, McPherson said that he was asleep when she drowned during their holiday at a cottage in Western Denmark. Following her death, he began to transfer money from her accounts in order to pay his debts. He also later on joined a group “Widowed and Young,” which was described as “Tinder for Windows.”

Pathologists found 13 separate injuries on Leeson’s body, which were thought to be caused by being restrained or a resuscitation attempt.

Leeson’s family filed a case against him but McPherson was not present during the hearing and was believed to be living in several countries like French Polynesia and Fiji. Prosecutors accused him of making his wife’s death look like an accident and planning it beforehand.

McPherson was previously convicted of 32 criminal offences of dishonesty or fraud in New Zealand, the UK, and Germany. He married Leeson in June 2014, and she was set to inherit the family business, which she had been overseeing when she met McPherson.

The hearing is still ongoing.

CyberCube has issued a warning about the increasing threat of cyberattacks on public sector entities, especially focusing on government and election infrastructure, in anticipation of heightened vulnerabilities during the upcoming US presidential elections and other global electoral activities.

In its latest report, “Global Threat Outlook, H1 2024”, CyberCube emphasises the urgent need for government agencies to improve their cybersecurity defences, strengthen election integrity, and work closely with cybersecurity professionals to address these challenges effectively.

The report also identifies eight sectors as particularly vulnerable to cyber threats, including: telecoms, IT, education, retail, arts & entertainment, financials, services, and healthcare — the latter being the most at-risk industry according to CyberCube’s analysis.

CyberCube noted that while sectors like banking and aviation are frequently targeted, they generally maintain stronger cybersecurity measures. Conversely, industries like mining and agriculture, although less targeted, represent potential growth areas for cyber re/insurers due to their relative lack of exposure to cyber threats combined with high security standards.

William Altman, CyberCube’s cyber threat intelligence principal, highlighted the critical nature of the threat, especially with the US presidential elections around the corner.

“The public sector becomes an increasingly attractive target for malicious actors seeking to sow chaos and undermine faith in democracy. Moreover, around 64 countries plus the European Union will hold national elections this year, involving nearly half of the world’s population,” he said.

“In some cases, the same cyber threat actors attempting to meddle in the US presidential election will also be active in other countries. Given the potential for significant attacks, bolstering defenses in the public sector is paramount in 2024 and beyond,” Altman said.

Additionally, the analysis delved into the activities of state-nexus cyber threat actors from countries such as Russia, Iran, and China, assessing their potential impact on critical infrastructures. Richard DeKorte, CyberCube’s cyber security consultant, elaborated on the expected trends involving these nations.

“CyberCube foresees an escalation in the attacks perpetrated by state-nexus threat actors targeting critical infrastructure,” he said. “Specifically, Iranian state-sponsored threat actors are likely to target critical infrastructure opportunistically. Russian and Chinese state actors are expected to strategically position themselves to disrupt infrastructure in sectors crucial to the national economy and security of the US and its allies.”

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Onda, a managing general agency specialising in cyber insurance at Lloyd’s, has announced the appointment of Patrick Cannon, FCII (pictured above) as its chief claims officer.

Cannon brings extensive experience in developing and leading claims functions within the cyber insurance sector, including claims advocacy, claims preparation, and incident management. His career spans significant roles across various organizations.

He has served as the head of cyber claims at Marsh from November 2021 and previously held positions at Tokio Marine Kiln, including head of enterprise risk and casualty claims from July 2020 to October 2021.

Additionally, Cannon was involved in handling a range of cyber-related claims as well as technology errors and omissions, and intellectual property cases at Tokio Marine Kiln and earlier at Brit Insurance.

His appointment aligns with Onda’s focus on bolstering its claims handling capabilities amid growing demands in the cyber insurance market.

“I’m delighted to be joining Onda at this important time for cyber insurance. Our industry has never been better placed to deal with the increasing technological disruption faced by businesses. I look forward to being part of this growing team and this exciting new product,” Cannon said.

Alex Jomaa, Onda’s Chief Underwriting Officer, also expressed his enthusiasm about Cannon’s appointment.

“We are committed to delivering an exceptional claims experience for our customers, so we’re delighted that Patrick is joining the Onda team,” Jomaa said. “Patrick’s deep experience will be invaluable in growing our offer and his expertise further entrenches Onda as the market of choice for cyber insurance.”

Onda’s focus on bolstering its claims proposition comes amid projected growth for the sector; a recent report from OAC revealed that cyber insurance’s global gross premium volume witnessed a yearly increase exceeding 20% from 2019 to 2021, with projections indicating a surge in demand over the coming decade.

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Shares of R&Q Insurance Holdings tumbled 45% after the company said that it would report a significant pretax loss for the year, according to a MarketWatch report.

Shares at 7:45am GMT were at three pence, a drop of 2.49 pence. R&Q shares are down 95% over the past 12 months, MarketWatch reported.

R&Q said Friday that the loss was driven by rising costs and a shortfall in reserves at its legacy insurance business.

The insurer said in a news release that it expects reserves from its legacy insurance business for 2023 to tumble by 23%.

“This primarily relates to tail claim development as well as inflation and abuse claim development across the portfolio,” R&G said.

R&Q said its reserves at year-end 2023 were around $1 billion. However, it said the sale of its Sag Main corporate liabilities joint venture will reduce that to around $670 million.

R&Q said it would sell its 49% interest in the joint venture to Obra Capital Management fr $27 million in cash and $3 million in Randall & Quilter PR preference shares currently held by Obra.

“We are pleased with the strong return on our investment in the joint venture, and this agreement is in line with our objective of realising value from within our legacy insurance business,” said Jeff Hayman, R&Q chairman. “Although we believe that the corporate liabilities market continues to represent an attractive long-term opportunity, developing regulations – including potential changes around capital requirements – have reduced the strategic attractiveness of direct equity participation in joint ventures of this type for R&Q.”

R&Q will use some of the money realised from the sale to repay its revolving credit line, MarketWatch reported.

R&Q announced last year that it was selling program management business Accredited to private equity platform Onyx Partners. The European Commission approved the deal last month. R&Q said the sale would allow it to “undertake a material financial de-leveraging” and “return the capital solvency position back to target levels.”

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The Annual Cargo Theft Report 2023, published by TT Club and BSI SCREEN Intelligence, highlights high inflation as a significant economic factor influencing patterns of cargo crime.

This year’s report notes a particular increase in theft of food and beverages, including alcohol, which now constitutes 24% of global cargo thefts, up from 16% the previous year.

Key findings from the report reveal that most cargo thefts occur during road transport, accounting for 71% of incidents. That said, theft from facilities has decreased from 30% to 23%.

The report also reveals the countries most affected, including Mexico, the USA, South Africa, Germany, and Italy. While electronics accounted for 9% of incidents, the financial impact remains substantial due to the high value of goods.

Regional variations in the methods of cargo theft were also noted, such as the use of fake police stops, known as “blue light crime” in South Africa, and “insider activity” leading to thefts in Asian countries.

Tony Pelli, practice director at BSI, emphasized the broader implications of cargo theft and how it causes companies problems beyond the billions of dollars stolen.

“Cargo theft is a problem that costs companies tens of billions of dollars each year and can cause significant disruption to important supply chains, from pharmaceutical products to semiconductors,” Pelli said. “Having accurate and up-to-date intelligence is the first step in combatting this problem and pinpointing the locations and types of theft that are most likely to harm global supply chains.”

Mike Yarwood, TT’s managing director for loss prevention, explained the company’s approach to these issues.

“In identifying shifting crime patterns in terms of new fraudulent methodologies and a focus on both historic and current geographic risk, we seek to assist operators in tightening their security processes,” he said.

Yarwood also highlighted the report’s utility in offering actionable intelligence and recommendations for mitigating risks, such as increased olive oil thefts in Southern Europe following poor harvests and rising oil values, and various fraud tactics used in Europe and the USA.

“Our combined experience as insurance provider and supply chain intelligence gatherer is invaluable, not just recording the details of crime but also in recommending practical actions and process design suggestions that will strengthen supply chain organizations in their fight against the threat of theft,” he said.

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Demand for mass timber, a sustainable construction alternative, has grown steadily over the past several years. However, a new trend is driving risks for the construction sector: mass timber being used for taller buildings, not just residential structures.

According to one expert, this shift is observed in Europe, Asia, and North America. Michael Bruch (pictured), global head of Risk Advisory Services at Allianz Commercial, noted that the increasing adoption of mass timber for higher-rise construction indicates a broader acceptance of the material beyond traditional low-rise buildings.

“The emergence of mass timber as a sustainable construction alternative represents a significant opportunity for the building sector to reduce its carbon footprint while also satisfying a demand for a more cost-efficient material but as durable as steel and concrete,” said Bruch.

“However, in any industry, deployment of new materials or processes can result in new risk scenarios, potential defects, or unexpected safety consequences, as well as bringing benefits, and mass timber is no different.”

Construction’s shift to mass timber – what are the most significant risks?

Bruch pointed to Allianz Commercial’s recent report on the risks posed by mass timber. According to the report, the construction sector is responsible for almost 40% of global CO2 emissions caused by concrete, steel, and fossil fuel-driven energy consumption.

Shifting to mass timber, a more cost-efficient material as durable as concrete and steel, allows the construction industry to lower its tremendous carbon footprint. Mass timber emits significantly less CO2: around 50% less than concrete and more than 25% less than steel, Allianz Commercial said in its report.

However, the potential risks associated with mass timber construction are significant, particularly regarding fire hazards and natural calamities.

“The good news from our research is that you can manage these risks,” Bruch said.

Fire is potentially the top risk of mass timber construction. Fire stands as the most expensive cause of all construction and engineering insurance losses, accounting for more than a quarter (27%) of the value of 22,000 claims analyzed over a five-year period, according to Allianz.

To mitigate this risk, Bruch emphasized proactive measures such as designing for fire resistance, using flame-retardant materials, and implementing proper construction practices.

He also noted that while natural hazards vary by region, the resilience of mass timber structures shouldn’t be underestimated.

“Natural catastrophe risks like hurricanes and gale-force winds can potentially affect beams, columns and panels. But mass timber is really strong,” said Bruch.

“Mass timber buildings weigh approximately only one-third of comparable concrete structures, and they have the highest strength-to-weight ratio, which enables mass timber to perform very well during seismic activity.

“Natural hazards can differ from region to region, but those risks can be managed well for mass timber buildings.”

Additionally, construction businesses face supply chain and labor exposures as mass timber demand grows. Mass timber must be obtained in sustainable ways, necessitating specialized production facilities.

“This means thorough logistical planning and management of building materials are essential to avoid costly project delays,” said Bruch.

“On top of that, construction firms may face challenges finding experienced workers for mass timber construction projects. But overall, mass timber buildings can be constructed faster than traditional buildings, so that’s a big pro that we’re seeing.”

Insurance implications for the construction industry as mass timber use expands

The global mass timber market is still in its nascency, but it has tremendous growth potential, according to Allianz Commercial.

Despite the risks involved, Bruch is optimistic about the potential of mass timber to meet sustainability goals and lower emissions. At the same, effective risk management practices and industry collaboration are needed to ensure the widespread adoption of sustainable construction materials and technologies.

Brokers and insurers can help construction clients transition to sustainable materials and technologies by providing risk management solutions and investment incentives.

Bruch stressed that each mass timber building is unique and presents specific risks that must be assessed and managed throughout its lifecycle.

“Given this market’s expected future growth, companies should do all they can to develop a greater understanding of their exposures, including fire, water damage, repetitive loss scenarios and even termite infestation, and ensure they have robust loss prevention measures to combat these,” said Bruch.

Do you have something to say about the risks associated with the growing adoption of mass timber in construction? Please share your thoughts in the comments.

Gallagher Re’s annual Florida Market Watch Report for the year ending 2023 highlights the state of the insurance landscape in Florida, focusing on companies with a significant presence in the state’s personal property market.

The report, drawing data from NAIC statutory statements via S&P Global Market Intelligence, outlines various metrics of performance, including premium growth, profitability, surplus, new company formations, and policy take-outs.

In terms of premiums, 2023 saw an overall increase across all subgroups compared to the previous year. The ANTS subgroup, which includes major insurers like Allstate (Castle Key companies), Nationwide, Travelers (First Floridian), and State Farm, experienced 19% growth in direct premium written (DPW), reaching $2 billion.

This surge was largely attributed to State Farm. The Florida Specialists subgroup witnessed a 15% increase in DPW, amounting to $22.7 billion, with American Strategic and Privilege Underwriters driving much of this growth.

Furthermore, Citizens, the state-run insurer, reported a notable 59% increase in DPW to $5.1 billion in 2023, fueled by an uptick in policies in force.

Growth in profitability

On the profitability front, 28 out of the 57 companies monitored reported underwriting gains in 2023, an improvement from 15 companies in 2022. Despite this, the Florida Specialists subgroup faced a net underwriting loss of $398.3 million and an after-tax net loss of $9.5 million.

Conversely, the ANTS subgroup achieved a modest net underwriting gain of $0.6 million and an after-tax net income of $24 million.

Overall, the market’s net underwriting income stood at $68.8 million, with after-tax net income at $760.9 million—largely contributed by Citizens with an after-tax net income of $746.5 million. The combined ratio for the market also improved markedly to 96.7% in 2023 from 133.9% in 2022.

The report also highlighted 15.6% growth in policyholders’ surplus across the market to $12.2 billion in 2023. Notably, Citizens’ surplus rose by 17.4% to $5 billion, and the Florida Specialists’ surplus increased by 16.7% to $6.1 billion, with net additions including capital inflows and surplus notes totaling $865.7 million.

Regarding new market entrants, the Florida Office of Insurance Regulation approved five new companies for 2024, aiming to diversify the state’s property insurance options.

Additionally, the take-out process saw significant activity in 2023, with 646,617 policies approved for removal from Citizens, highlighting efforts to redistribute policies to the private market and reduce the state insurer’s exposure.

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After two decades serving in a variety of senior leadership roles with Munich Re, Jill Beggs’ decision to “boomerang” back to the reinsurance roots she had first laid down with Everest Group, Ltd. was simple.

Beggs (pictured) returned to the company in 2021 as the head of North America reinsurance, invigorated by the vision of the senior leadership team regarding people and culture – which she strongly believes is what sets the company apart. In February of this year, her remit was broadened as she stepped into a new role as EVP of Everest Reinsurance and COO of the reinsurance division, a position that includes managing the profitable growth of the division’s worldwide reinsurance portfolio.  

“I’m super excited to partner with our reinsurance colleagues and leaders across the globe to build on the momentum that we have in the business,” she said. “We have a really strong foundation. We are always pursuing better, but a key differentiator is not necessarily what we do, but how we do it, which I think is so special. We’re incredibly collaborative, and we work across regions and continents seamlessly to act on behalf of our clients. Advancing that culture is a top priority for me.”

What challenges are facing today’s reinsurance market?

Beggs spotlighted the two “pervasive challenges” being faced across the reinsurance industry. The first challenge is one being seen across so many global businesses – how to attract and retain top-quality talent. Having the best talent is always going to be a top priority, she said, because success in reinsurance starts with people.

“This is a relationship business; our clients aren’t just buying our services or a contract, they’re looking for true partnerships and you can really feel that,” she said. “The war for talent is a challenge for all of us, especially in a relatively small industry like ours. Another major challenge, I would say, is some of the enormous risks facing our business.

“If you think about increasing weather-driven catastrophes, global economic and geopolitical volatility, and cyber threats, clients need companies not only with capacity but with a breadth of expertise and solutions, not only to meet the needs of today but to evolve with them. The risk landscape is changing every year, almost every month now so clients are looking for companies that can evolve with them and work with them to provide solutions.”

Looking at natural catastrophes, she noted that the industry has faced over $100 billion in average annual losses every year since 2017 which is more than double the average of the previous five years. 2022 brought Hurricane Ian, the most expensive hurricane in Florida’s history, while 2023 was another $100 billion-plus loss year for the global nat CAT market, highlighting that the trend of these costs rising year-on-year is not slowing down.

The role of the reinsurance market in offsetting these challenges

The challenges facing clients are continual, she said, and it’s the role of the reinsurance market to provide solutions to these challenges. Examining some of the ways she and her team are looking to offset these challenges, she looked first at how it’s working to solve the talent crisis, in recognition of the fact that talent is at the root of what sustains the industry.

“I’m proud to say that our colleagues join Everest to develop and grow their careers,” she said. “And we’re proud that we have also retained our best talent even though the labour market has been in turmoil over the past few years. They stay because we’re part of a vibrant, collaborative culture which I think is really differentiated against other cultures that are out there.… and we also invest in our talent.

“We’re developing and expanding our learning, mentorship and awards programmes, at all levels. We do this to equip the next generation with the diverse skills and experiences which are vital for their growth. Our reinsurance associate programme is for early career talent but we have our mentorship programs all the way up the chain and we have development programmes for our highest potential colleagues at the most senior levels within the organisation. So, that development piece really spans the full breadth of the organisation.”

With regards to navigating the wider risk landscape, Beggs noted the company has been structured to meet clients where they are. It is by being nimble, creative and entrepreneurial that Everest can focus on delivering that service, she said, because its flat and heavily interconnected structure means the firm is able to deliver its expertise in a matter of hours, rather than days or weeks.

“We feel we have the right people in the right places, we have local teams who are deeply connected to their markets, and they’re empowered to make decisions,” she said. “That’s a key differentiator for us. We’re able to pivot and respond to those local conditions without the bureaucracy and complexity which sometimes has a tendency to slow some of our competitors.”