Vanessa Smith:

Hello, everyone. Welcome to today’s ICMIF webinar, “The emerging risks from COVID-19 in 2021 and beyond”. So it’s a topic that is certainly front of mind for a lot of our members. We’ve had a great response to this webinar, a large number of registrations from more than 20 countries. Today, we’re going to be hearing from ICMIF Supporting Member, Willis Re, on what impacts they’re seeing in the current insurance and reinsurance markets due to COVID-19. And also view some of the longterm potential impacts of the pandemic. They’re also going to share with us an overview of the current claims environment.

I’m very happy today to introduce two speakers from Willis Re. Firstly, we’re going to be hearing from Robin Swindell, Regional Director. And then we’re going to be moving on to hear from Steve Robson, Global Head of Claims. So Robin and Steve, thanks so much for joining us today. And at this point now, Robin, I’m going to hand over to you.

Robin Swindell:

Thank you, Vanessa. And hello, everyone. It’s good to see some names I recognized from previous MOROs and Biennial Conferences. For those that don’t know me, I’m a Regional Director in our Asia Pacific region, based in London. I’m really pleased today to be joined by Willis Re Global Head of Claims, Steve Robson. Before we dive into the meat of our presentation, I just wanted to stress that we’re giving a broker view on what’s happening in the market. We’re not expressing any legal opinions today. And if you do feel that you need legal advice regarding any ongoing claims or coverage issues, you should seek that from proper legal interpretation within your own jurisdiction and not rely on what we say today. The issues we’re talking about will be very complex and many re-insurers and insurers will differ significantly in the approach they take to them. We’re always happy to discuss this in more detail, but we won’t be going into individual cases today, we’ll be talking about the market in general.

As Vanessa kindly said, at the start, I will be speaking first about what we’re seeing in the re-insurance market. And in particular, moving on to speak about why it’s very important for mutual specifically to get their re-insurance coverage right. That’ll take about 15 to 20 minutes and then I’m going to be handing over to Steve. Who’s going to give an overview of the very fast moving claims environment at the end. And that should leave us plenty of time for questions and answers. So do use the chat function within the platform to get your questions going as they come to you. And we’ll pick those up at the end.

First of all, what have we seen in the market? If we turn our minds back to the 1st of January, 2020, which seems a lot more than the 15 or so months ago it was, the world was becoming aware of the growing pandemic, but there was really very little impact on the re-insurance market. We did see a few re-insurers asking for information and even requesting exclusions, but by and large, the impact was very little. As we moved through the course of the first quarter of 2020, we began to see some more developments. In late March, the London Market Association published its first model exclusions. These strongly focused on first party property business. They were very strict exclusions. No exceptions, very tough language used. Initially, they were focused very much on COVID-19 itself, but they were later within a matter of few days, broadened out to cover communicable disease as a whole.

This happened very much in the midst of the 1st of April renewal season which is a big renewal season for a lot of our business around the world. It resulted in a very piecemeal response. We saw a wide range of clauses proposed. We saw a lot of re-insurers starting to push very hard for exclusions, but very, very close to the inception date often after terms have been agreed. When we looked back on the placements, we found that actually there were relatively few exclusions put in place at that time although that has changed subsequently. And again, around the 1st of April, we also saw the LMA starting to work on third party liability type exclusions for the first time.

So we moved through the second quarter of 2020. We begin to see much increased use of exclusions, particularly on property, but very little agreement on what clause should be used. And in many cases, upwards of 10 or 15 different clauses proposed by different re-insurers on the same contract. Late in the quarter, there were some further developments with the LMA publishing a new set of clauses, which allowed for the limited right back of physical damage in property treaties, but on the basis of named perils.

As we moved through the rest of the year and into the key 1st of January, 2021 renewals, we see the majority of re-insurers now pushing very hard for exclusions. And in general, the standard LMA exclusions without right back were favorite. However, there’s still a great many variations and in individual markets, we do see some market wide solutions and we also begin to see the use of client specific exclusions. So exclusions drafted by brokers and insurers specifically for their contract. We also begin to see the acceptance of the principle of writing back some of the physical damage for named perils. Although it is worth noting that a number of re-insurers expressed quite a lot of caution around strikes, riots and civil commotion, particularly in territories that they felt were at risk of some civil disobedience or rioting.

We’re just letting the dust settle on the 1st of April, 2021 renewal. So now over a year since the start of the pandemic, and we’re now seeing widespread, but not exclusive use of exclusions on property business less so on casualty business. We’ll come to that in a bit more detail in a moment. And still very many variations in clauses out there. We’re seeing a greater, but not entire acceptance of the principle of writing back damage for named perils. We’re still seeing a couple of re-insurers pushing very aggressively for the standard strict LMA clauses. But on the other hand, we are also seeing a good number of re-insurers accepting the principle of writing back physical damage that would otherwise be covered under the re-insurance or otherwise covered under the original insurance policy.

For long tail lines, we’re also seeing a significant increase in the amount of attention paid to COVID and pandemic. This is especially true for general third party liability, employers liability and particularly workers’ compensation. We are seeing some clients around the world clarifying that they won’t be treating contagious disease as a single event for the purposes of aggregating it under their casualty treaties. And we are beginning to see some mixed use of exclusions, certainly more exclusions than we saw a year ago, but still not universal by any means.

I mentioned the dust is still settling on the 1st of April renewals and we haven’t quite finished counting up the numbers. But here’s a snapshot of where things stood a little bit earlier in the spring. On the left hand side of the slide, you can see casualty contracts and there’s a pretty even split 51% of clauses containing some contagious disease exclusion, 49%, not including those. Where they are included, you can see quite a wide range. About 28% of the clauses were used are quite client specific. A number about 22% are amended versions of the LMA clause and the remainder of various LMA clauses or local market equivalents.

On the property side, we saw a much greater use of exclusionary language. About 88% of the contracts prior to 1st of April, that we saw had a contagious disease exclusion, a large number of those however, were amended and a similar number of those where existing LMA clauses or local markets solutions. Worth taking a moment to talk about the portfolios that avoided any exclusionary language. On the casualty side, the long tail side, these were typically private lines accounts, SME portfolios and portfolios where cover was statutory and therefore couldn’t be excluded from the reinsurance. On the property side, the range of contracts where coverage could be continued without an exclusion was much narrower. It really boiled down to a very small number of private lines portfolios covering individual homeowners and also policies that very strictly and clearly were on the basis of natural catastrophe only. And even there, we saw some natural catastrophe only covers also having exclusions.

So as I said at the beginning, we think it’s particularly important for Mutuals to get the exclusionary language right. So I just want to step back and think about why that is. And that comes down to a very big difference in the relationship that Mutuals have with their re-insurers when compared to their commercial counterparts. And we break this down into three areas. The first of these, we call focus. And this recognizes that cooperatives and Mutuals have a very close longterm relationship with their members and their policy holders far more so than their commercial counterparts. This allows you to offer superior quality of products, really good customer service. And it also, we think gives you a really significant underwriting advantage over your commercial rivals in that you truly understand the needs of your policy holders, but also what they’re capable of in terms of risk management. The corollary of this, what this does mean is that you are more likely to have non-standard policy forms and coverage practices when compared to the commercial market.

The second point we wanted to make was around reinsurance leverage. Many Mutuals choose to exert their focus and expertise in a very specific field. This can be leveraged to support better decision making, better risk management, we believe more informed and more profitable underwriting and definitely superior customer service. Ultimately the focus that many Mutuals bring to their lines of business allow for better value for their members. However, this means that many Mutuals are mono-line and this mono-line focus means that they often have less reinsurance negotiating leverage compared with their commercial counterparts. If you can imagine some of the world’s largest global insurers who go to market with many billions of dollars of reinsurance business placed across different lines of business, they are able to exert a great deal of leverage over re-insurers in a way that mono-line Mutual with maybe just one relatively small reinsurance program might be able to do.

The third area that we wanted too, we broadly call capital. And this recognizes that the equity, the capital of mutual insurers belongs to your policy holders, the fundamental tenant of the mutual movement. Unfortunately this means that, that capital is inherently less flexible than it is for non-mutual capital. Reinsurance is typically seen and behaves as a proxy for capital. So the reinsurance that is bought by a Mutual is far more important to its capital base than it would be for a commercial company. An example of this is that the large global commercial companies are able to see reinsurance as one of a range of options, including issuing debt, going back to their owners and asking for more capital, issuing cap bonds and subordinated debt. A lot of these options are not open to most Mutuals. So reinsurance becomes far more important for Mutuals.

So why is this an issue today? Well, these three factors do present a very specific challenge for Mutuals in the current reinsurance market and any reinsurance market where there is a quickly evolving risk. And what we’ve often seen and we certainly saw in the last year or so is a knee jerk response from some re-insurers to very quickly and very strictly exclude coverage for apparel that they don’t yet fully understand or that they feel may be problematic. And because reinsurance is more important for Mutuals and for commercial companies, this is more of a problem for Mutuals than it is for commercial companies. We would always as reinsurance brokers wish to get away without any exclusionary language. I hope that goes without saying. But unfortunately in the majority of cases at the moment around pandemic and contagious disease, we no longer think this is possible. We do think it’s very reasonable for a compromise at this point. I think the reinsurance and insurance market is coming to terms with the fact that some aspects of epidemic and pandemic are too large for the industry as it’s currently structured to fully cover in the way it has done in the past. And they move into the territory such as some forms of terrorism, war and nuclear risk, which have taken many years to develop a very limited coverage.

So thinking about the coverage, I think the first step is to consider what coverage your original members require for their particular exposures. And this is where your really good knowledge of your members behaviors and your members needs can help you. Ideally or a good starting point could be adopting a clause that excludes pandemics or epidemics per se, but doesn’t exclude the broader field of communicable disease. And we’ll talk a little bit about this later on, but there are many things that fall within the definition of communicable disease, which we believe continue to be insurable. Whereas I think we’re at the stage of saying that pandemic and epidemics can’t be insured and reinsured in their current form. It may also be possible to adopt a communicable disease exclusion that fits really closely back to back with your original policy form, putting re-insurers in the same position as you are and aligning your interests. An example of this is the property damage and any associated business interruption would be written back or in the case of long tail lines, bodily injury would be written back.

I think this point, our general advice to all our Mutual clients is don’t be afraid to push for bespoke coverage. The market continues to evolve and develop, the use of exclusionary language continues to develop. And even if you have already agreed in the last renewal some form of exclusionary language, there is no reason to have that discussion again now that the dust has settled. And again, I would stress in any communication with your re-insurers that Mutuals benefit from a very real information advantage as a result of your close relationship with your policy holders. And in setting any language, we would always ask re-insurers to bear that in mind. We’d also as always advise you to pay very close attention to the construction of the individual clauses. And I’ll cover that very briefly on the next slide.

As I mentioned before, communicable disease, infectious disease, pandemic, epidemic, all of these terms have been used sometimes interchangeably in the last year, but they all have very specific and varied actual meanings. We know that many insurers and many of our clients give cover that falls within the scope of communicable disease, but does not constitute a risk of pandemic or epidemic. We know that many of our clients have successfully offered food poisoning cover, cover for Legionnaires’ Disease, etc. And we see no reason why these should now be excluded when they don’t present a risk of pandemic. We’ve also seen in the drafting of exclusionary language recently, some very broad connective language. And whilst we accept that the exclusionary language should refer to directly resulting from or caused by or similar language, we are concerned that we’re seeing a lot of language which talks about contributed to, by or in connection with. The danger here is that this could give in strict interpretation of the clause and opportunities doing exclude the entirety of a complex loss where the amount recoverable probably should only be scaled back or adjusted to reflect COVID loss.

We’ve also seen a number of attempts to reverse the burden of proof, so that in the event of a claim, the burden of proof falls on the ceding company to prove that the loss is covered rather than the re-insurer to prove that the loss should be excluded. We feel this is very detrimental to our clients. And we also think it’s contrary to a wide range of drafting law and very much to industry principles. And we would always recommend pushing back hard on this. We’re also seeing, as I mentioned before, picking up underlying language. So looking to go as close back to back with the original policy, if possible, or if not, with the coverage already given under an all risks re-insurance policy. And here we’re seeing writeback where such physical damage is directly caused by or rising from a peril that would otherwise be covered here under being the insurance policy or the reinsurance policy. And I think that’s the next step for a lot of companies in renegotiating their contractual language.

So there, in the interest of being brief, I’ll leave it. That’s a very quick run through of some of the key issues we see in getting contract language right. And I say I would stress that I think this is an opportunity for Mutuals to stress their unique relationship with their policy holders, with their members in negotiations, with re-insurers, many of whom particularly those outside of the mutual movement won’t automatically give credit for the information advantage that you carry. With that, I’m going to hand over to my colleague, Steve Robson, to give a claims perspective.

Steve Robson:

Thanks very much, Robin. Thank you for that. I just wanted to give a brief overview initially of some of the facts, but then it’s going to be a bit more of a narrative around how the market performs in these circumstances, how it looks at various different issues. As Robin said, you do tend to get an initial knee jerk reaction to a lot of these, shall we say, unexpected type events and it’s worth. I think you would find it interesting to see the path that a lot of re-insurers follow to get where we need them to get to.

So this tells you about some of the knee jerk reaction as well as we get from the market. Now, obviously, like any business, the re-insurers and the insurers are asked to provide estimates for their shareholders, their capital riders, the regulators, et cetera, where they think maybe a circumstance catastrophe or event maybe. This was just giving you an example of some of the estimates that came out in the market in 2020 and up to 2021. And then what the actual book losses are in the insurance market. So far, as you can see, for one year in, we’re sitting around 25 billion. At Willis, we always felt the loss estimate was around 40 to 80, which if you think about it, is obviously a very, very large stretch, but that is with all the uncertainties and the unknowns.

If we go to the next slide, I think it details a bit more where we’re looking at things. So if you look at the three biggest carriers, as we’d say from a reinsurance market, you’ve got Swiss Re, Munich Re and Lloyd’s. Swiss Re and Munich Re are picking up a lot of the property damage, a lot of business interruption, a lot of those types of elements. It’s interesting that Lloyd’s doesn’t tend to operate in those fields. So most of the Lloyd’s numbers are reinsurance based or contingency based. And what I mean by contingency is things like event cancellations, like the Olympics or Lions Tours or those kinds of things, which also include huge numbers for TV rights et cetera. So as certain events or certain things mitigate themselves, those numbers we expect to continue to reduce a bit. Obviously, there was a little bit of an increase initially, although a lot of people factored it into their reserves after the Supreme Court judgment in the UK specifically around some of those business interruption issues.

On the next slide that’s where we get into a discussion really, because those are the factors that the re-insurers and a lot of these insurance and reinsurance companies have to take into consideration when making their estimates of what they think their exposure is to the loss. It’s worth mentioning at the beginning and also to circle back to this, nearly all the re-insurers are very used to paying major catastrophe losses, big events. It’s not unusual for them. What does tend to create these knee jerk reactions and throw them a bit is when there’s unexpected event, some have called this a perverse loss, as in, even though people knew about pandemic, most boards would have discussed it in probably their own personal risk matrix when they were looking at their operating risk management. But from an exposure point of view, it has created some anomalies of what they expected versus intended, I’ll come back to that, to happen.

So for example, if you’re writing a barbershop program, which obviously myself and Robin are in desperate need of at the moment, and hopefully when we open up again, we’ll get that done. But it would be expected by the re-insurers and the insurers to cover certain losses emanating from those policies. But what would be unexpected is for every single policy they issue to be here. So therefore, there’s unexpected aggregation of value that has been created by this so called perverse loss. So that has thrown at people. The reason I mentioned expected versus intended is a few early doors, as I say, very knee jerk reactions and a lot of this has gone away, people were saying, “Well, we never intended to cover this, we never intended to do this, we never intended to do that.” That has proven to be unsubstantiated because they obviously did intend to cover a certain element of loss, but what was unexpected was the values and the aggregation and the size of the losses. And as I say, that’s mitigated and pretty much gone away over time.

Case law. So when re-insurers are looking at a loss, the first thing they want to establish is on the original policies or the policies that you issue that there was clear coverage and liability on the original. So if you gave coverage and you have to pay, you’re liable to pay, you pay it, therefore reinsurance would respond if it’s a clause or a condition that’s covered under the reinsurance policy. I’ll come back to aggregation. So the general tenet of what losses would be covered or whatever, everybody was expecting each insurer or Mutual to show that they had clear liability under the original to pay the original claims.

Now, obviously with regards to business interruption, the Supreme Court judgment define that quite clearly for a lot of policies. So therefore there’s clear liability established. Now, when you get into the reinsurance side, no matter what was said on the direct side or the Supreme Court judgment, it has its own sets of case law, which differ from jurisdiction to jurisdiction very much. This is why I’ve got so much gray hair. There’s so many complications on this. It’s quite difficult to get in a row at some point. The case law has been defined over the years that an event tends to happen in a particular time, in a particular place, in a particular way. And that’s the case law that drives the reinsurance side. So each re-insurer is now looking for how pandemic or how COVID or losses emanating from COVID, can be aggregated together or cannot be aggregated together to form the part of the reinsurance recovery. And that’s the big complicated issue here we have at the moment.

For example, is the guy will pandemic a loss. Well, under the case law, and again, this is just my opinion, different people have different opinions on this. Under the case law, you would say the current case law, because it doesn’t mean there isn’t going to be any new case law, you would say that was an incredible challenge to say that a global pandemic was an individual event or occurrence under a reinsurance policy as one loss. Now, obviously each policy on its own merits. There are policies out there that give broader language, may have the words catastrophe or cause in there, which may be slightly broader. So all of those things are being debated.

The other element that’s being looked at, at the moment with regard to COVID is the lockdown, all individual lock-downs, the actual events, as in those are the ones say, if we look at business interruption or contingency losses, are those the triggers, are those the losses or the trigger points that are causing the events? Therefore, they have an aggregating effect. So if, for example, the lockdown in the UK to use an example, would that be one event or four events as there are four different regions or regional parliaments? The current thinking is just for information that UK would be one event if that was the events scenario, because of Boris’s announcements on the 23rd of March triggers a lockdown, which basically triggered all the losses theoretically.

Then could you add Ireland to that? Could you add France to that? Could you add Germany to that? These are all issues that then would have to be debated. The current mood in the market is that at minimum, each country lockdown would probably be considered an event. And we are getting most support around those areas. There is some discrepancies of say, somewhere like Germany or America, where you’re saying, well, it could be 50 different states, should it be 50 events, Germany, each of the different federal principalities or the cantons in Switzerland. So, as I say, there’s a lot of moving parts here. There’s a lot of discussions over what could or couldn’t be an event.

And then this creates other scenarios. For example, when we have lists of perils in reinsurance contract, sometimes there’s a list of what they will call natural perils and what they will call non-natural perils. So a non-natural peril will be a fire, a natural peril will be a flood, so on and so forth. A natural peril probably an earthquake or a hurricane or whatever. Then what that would then say, if you were then looking at these things, if the loss, say, I’m not saying that the individual lockdown definition is correct, COVID could eventually end up being defined as one event, but that will probably have to be tested in the courts in the individual jurisdictions.

But if say, lockdown was the event that’s triggered all the losses, then you would probably say that’s a non-natural peril. So therefore the non-natural perils or clauses or various different limits would apply. If COVID is the event that’s driven all the losses, you would therefore probably say it was a natural peril. Obviously, being a virus, it’s naturally occurring. That’s a very layman’s interpretation, but those are the debates that are currently going on. I want to circle back to the bit of that at the beginning. The re-insurers are looking for certainty and are used to paying losses. They’re used to paying. There’s nobody trying, in my opinion and the people I’m dealing with, trying to find ways not to do things, it’s trying to find ways to do things correctly, to do things in the right way. They have obviously hundreds of policies involved. They want to be consistent. They want to take a consistent approach. They want to support their clients and their policy holders. They just want to do it in the right way and they don’t want to create any precedential issues by taking different opinions with different people.

Saying that, obviously, each wording, they will definitely do this, each wording on its merits. And there may be slight variances on people’s wordings that change some of that approach. So that’s what we’re saying. Now with this in regard, it’s very interesting and to justify my thoughts that re-insurers are trying to find the way to do the right thing is there are a couple of very minor ones, but there are currently no formal disputes, no arbitrations, no litigations that have been filed in the recovery of these losses from re-insurers. And we have obviously settled some claims. We have had some policies paid for various different reasons under the merits of their own covers and so forth. And the re-insurers and the re-insureds or our clients with our assistance are negotiating ways to get that certainty around their recoveries. If nothing more so that the clients obviously can reaffirm to their capital providers, shareholders, analysts, whoever exactly what their gross and net position will be on the exposure to COVID or the pandemic.

That’s a main driver is the consistency of approach, clear liability on the original trigger, be it COVID or lockdown or however people are deciding inside their wording to produce that. And our clients have varying positions, as Robin mentioned at the beginning, depending on their wordings on their circumstances, how they wrote their policies, what their business is covered, what clauses are covered, how they’re defining their perils. So there are a lot of moving parts on this. So that’s a brief summary of the way in my view, the market is currently responding. The re-insurers, we are obviously vigorously pursuing our client’s positions as you would expect, and the re-insurers working with us and listening to us and we are resolving a lot of the issues. We are knocking off a lot of the concerns from the initial knee jerk reactions of a year ago. We’re now really down into the nitty gritty of what is in and what is out.

Our clients have taken very reasoned positions in how they believe their insurances responded. And the re-insurers are more than prepared to pay the losses in a consistent and appropriate manner. And the exclusions going forward, Robin’s being much more polite on some of it, I’m going to be slightly, because I was a carrier, I was on the other side for 40 years. So therefore I’m a little bit concerned about how the exclusions are being thrown around in the market, especially issues like follow the fortunes and removing that back to back nature of reinsurance coverage. As Robin said, we are very bullish as a broker to make sure that is absolutely minimized and anything daft, shall I say, is taken out of there. But I think that is reducing and is now more sensible approach of pricing for the risk in the right way and understanding what the risk is.

And I just think that’s a journey we may need to go down a little bit more. So hopefully that’s explained some of the complexities, unfortunately, we’re still involved in. I do believe even though so there aren’t any real big formal disputes at the moment, there will have to be a couple. I think they will be more than on the lines as again, for certainty as in both sides, then we’ll need to know exactly what the answer is to affirm their growth in that position. I think all re-insurers are expected to pay something even on those disputed losses, but it’s just how it’s paid and how it’s framed. And sometimes that requires a bit more clarification and certainty certainly in the bigger values. So thank you for your time. I’m happy to take any questions on any of that.

Vanessa Smith:

Thank you very much, Steve. Thank you very much, Robin. And no pun intended, but you have covered an awful lot there in your presentation. I mean, where do we start? It’s so interesting, the discussion around the trigger points for the events, whether it’s the number of lockdowns, how different territories are going to be experiencing that. The message that was coming across there about pushing back, this coverage is constantly evolving. But there’s obviously a lot more clarity now 12 months in, which we would expect to see.

So we’ve had some questions coming in. Firstly, there’s a question for you, Robin. With regards to the exclusion clauses, do you think that the use of exclusion clauses has damaged the reputation of the industry generally? And what impact will this have on mutual insurers, in your opinion, who traditionally have been seen to do the right thing for their members?

Robin Swindell:

That’s a good question. So has the reputation of the reinsurance industry damaged? I think there’s certainly been a little bit of damage maybe bent rather than broken about and that’s a little bit tarnished in some, but I feel we’re moving past that. I think that’s the good news. I think what we’ve seen in the last year is that re-insurers have been moving from that very knee jerk, very strict position, they try to enforce it very short notice very late on last year to something that is more moderate and that we recognize in many cases is much needed. So I hope we can move past any reputational damage to find something more equitable there.

My concern is for those mutual insurers who in the meantime have tried to do the right thing, but haven’t had the support of some of their longterm reinsurance partners. I think that, that applies to some, but not all. I think the re-insurers have been very mixed in their responses and suddenly some re-insurers have made every effort to follow the fortunes of their mutual clients. Others unfortunately have perhaps moved rather more along that knee jerk response. I don’t want to jump into details on individual clients. I know some clients have found it a very difficult year, but looking forward, I think we will find solutions developing that will help Mutual insurers continue to offer the coverage that individual policy holders need.

Vanessa Smith:

Thanks Robin. Thank you. We’ve got a question for you, Steve. Do you monitor reinsurance performance on cases such as this?

Steve Robson:

We monitor reinsurance performance generally in the fact that obviously a lot of reinsurance recoveries and claims payments are pretty straightforward. Therefore, it’s about speed and accuracy and turnaround and we monitor that. And some re-insurer leads are better than the others, but most are consistently pretty clean in that regard. With a circumstance such as this, we do monitor their individual performance with regard to their attitude of making sure they treat each policy on its own merits, that they’re prepared to discuss the issue that they go through. We look at the play. The thing is myself and my team as we get involved with Willis Re, we’re the focal point for dealing with any issues. So we don’t just deal with claims, we deal with the boards of these companies and various others and very senior people and underwriters, because it’s usually a corporate melee inside these re-insurers of who’s making the decisions on how things are approached. So we need to go to different levels.

What does happen from that? So it’s a little bit anecdotal to be fair on a lot of their performance. But to Robin’s point, my personal view is a lot of people have behaved after maybe some initial knee jerk reactions very well, but there are some exceptions. And I have regular discussions with people like Robin and other executive pricing directors and producing brokers about who are the good leaders and who aren’t. And frankly, even if they do things, really who steps up when the chips are down? So we spend a lot of time and effort making sure that our insurers are good partners to our client. And when the difficult issues happen like this, that happens.

I mean, for example, we’ve got one leader who I had to present it to him. I asked him to get something done for me. The leader agreed it. And this was $10 million chunk, the leader agreed it, he got the second degree, he got the Bureau to agree it. And the whole thing was done in an hour, right? So there’s people who can step up to the plate when they want to. And I think what’s good, I’m sure, obviously Robin would agree, we spend a lot of time discussing who the appropriate people are in the right place to make sure when the chips are down, we get good performance or certainly good discussion.

Vanessa Smith:

Robin, if you’ve got anything you’d want to add to that?

Robin Swindell:

No, that’s very much the case. And that information, both the qualitative and the quantitative, that come from Steve and his team and from our interactions is something we’ll be feeding back. And we’ve already started to feed back to our clients in choosing reinsurance panels. That’s always a little bit difficult in the immediate aftermath of a loss. There’s often a recognition that we want to keep the business relationship on an even keel whilst we’re in the process of negotiating these claims. But certainly going forward, our recommendations will strongly factor in how good a partner and individual re-insurers have been during a time of crisis.

Vanessa Smith:

We’ve got time for a couple more questions. So if anyone watching it has still got a burning question, please do share it with us. We’ll try and get to that before we end shortly. So a bit a two part question here. For either of you, do you think reinsurers will drop their requests for communicable disease exclusions over time? And are we likely to see exclusions become more uniform over time?

Robin Swindell:

So if I start on that one, I don’t think we’re going to see re-insurers walk away for seeking exclusionary language totally. What I would hope is that over time, we’re able to focus that on the things that really do matter to them like epidemic and pandemic, and that we’re able to be more flexible about things like communicable disease and perhaps narrow down the definitions to allow our clients to continue to give the coverage that in many cases have been giving for decades very successfully and that don’t present a pandemic risk. So I think rather like the way the reinsurance market changed after 9/11 and we started looking at terrorism cover differently, rather like the aftermath of the first world war when we started to think about the risk of multinational war differently, I think that the reinsurance market, there’ll be some risks that we will continue to need to exclude. But I would hope that we will see more types of clauses going forward. I think it would be a sign of a healthy and responsive reinsurance market. See a wider range of clauses to move away from some of quite aggressive model clauses towards things that are tailored towards individual re-insurers.

And Steve picked up, what we’re interested here is how responsive re-insurers are on individual cases, either on claims or on his side or be that on policy negotiation on my side. And I think what we will be asking our insurers to do is consider very carefully the needs of their clients and the Mutuals in particular, to make sure that they have the right level of coverage.

Steve Robson:

Yeah, I think I would agree with all of that. I think the reinsurance will change. As I go back to the point on what causes the problems is the understanding of the ultimate exposure and the ultimate risk given. So I don’t think necessarily the exclusions as uniform exclusions. I think that they are prepared to give coverage when they understand the risk and the potential exposure from that risk. So would they be prepared to give a global pandemic cover? I would suggest that would be unlikely and that will probably be excluded. But are they prepared to give a countrywide issue or maybe even a little more local than that? If they could understand the risk exposure involved, I think there will be write backs in there. I think it’ll be along the lines of world trade center where the big unknown would be excluded, but then there would be write backs of the bits that they are prepared to include, which would be the bits they can quantify and understand the risk. And therefore, again, it goes back to price accordingly, because they then understand their potential exposure.

Vanessa Smith:

Thanks, Steve. Yes. As you’ve said, a lot of moving parts over the last few months, a lot of ongoing debates, a lot of uncertainty still. So thank you so much to both of you for sharing your insights today with all of us. It’s been extremely interesting and very useful. We’ve had some good questions coming in.

If anybody on the webinar comes up with another question after we’ve finished, please do get in touch with us. And I’m sure Steve and Robin will be very happy to continue any discussions after the webinar.

So thanks to both of you. Just before we finish then, just a reminder for everybody that we have been recording the webinar and you will be sent a link of this recording. So please do share out with colleagues in your companies.

Steve Robson:

Thank you very much for inviting us by the way. It was pleasure.

Robin Swindell:

Thank you. It’s been a pleasure.

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