Mike Ashurst: 

Hello everyone. I hope you’re all well. I’m pleased to advise that we have a record number of attendees to this webinar today, and we’re delighted that you’ve all been able to join us. Obviously, we should have been in Finland this week for the actual ICMIF event [Meeting of Reinsurance Officials, MORO] but I’m not going to dwell on that. And as we have Kimmo Heikkinen from LocalTapiola on the panel today, we can still bring a piece of Finland to you virtually. 

I’ll now hand you over to the panel. We have Greg Lockard (Shelter Re), who’s moderator. We have Andreas Beckmann from R+V. We have Kimmo Heikkinen from LocalTapiola. We have Mathilde Jakobsen from AM Best. And we have Ditte Deschars from Willis Re. Thank you all for joining us and over to you, Greg. 

Greg Lockard: 

Good morning, good afternoon, good evening to each of you, wherever you may be joining us from today. In these unprecedented times, I hope for your good health and stability to each of you, along with your families and colleagues. It is disheartening to think that we should of been in Helsinki, Finland today to join our friends and host from LocalTapiola and preparing for the kick-off of the biennial MORO Conference. But I have found great pleasure in hearing about the resilience of our industry and this membership base, specifically, and how member companies are stepping up to support their policy-holders and the communities you live in. 

Thank you for joining us today, and a special thanks for the wonderful team at ICMIF to bring us a webinar series this week due to the postponement of the MORO event. The ICMIF team and ICMIF Reinsurance Committee was actively working to bring a high-content agenda together and the wonderful list of speakers and contents was too good not to find a way to share. So welcome to part one of five, the “Current State of the Reinsurance Market”. 

My name is Greg Lockard. I am the managing director of Shelter Reinsurance, which is a subsidiary company of Shelter Mutual Insurance Company, operating out of United States. I do have a distinguished panel joining me today and they will be sharing their viewpoints of the reinsurance market from many different perspectives. Mike has shortly introduced the panel, but I will go into a little bit more detail. 

First off, we have Ditte Deschars, regional director of Willis Re, and she’ll be coming into this panel from a broker perspective, from someone that’s heavily involved in various insurance markets and the reinsurance needs of their large client base. We also have Mathilde Jakobsen Jakobsen, director with AM Best, speaking from the rating/credit agency perspective. Next we have Kimmo Heikkinen, head of reinsurance and international services with LocalTapiola, speaking from a ceding and reinsurance buyer perspective. And last but certainly not least, Andreas Beckmann, chief underwriting officer of R+V Re, speaking from a reinsurance perspective with a global footprint. 

There’s been a lot of activity recently due to the impacts of COVID-19 pandemic that has affected the reinsurance industry, and this comes on the heels of several years of increased catastrophic activity and underperformance of the reinsurance industry as a whole in terms of margins expectations. Mathilde Jakobsen, I’ll turn it over to you first. What is AM Best’s perspective on the reinsurance marketplace? 

Mathilde Jakobsen: 

I want to start just briefly by talking about how we view the global reinsurance segment at the end of last year. Going into this crisis, the global reinsurance segment benefited from very strong risk-adjusted capitalization and financial flexibility. But it had also struggled for a while to meet its cost of capital. It struggle with performance, which was affected by soft market conditions, low interest rate, and heightened claims activity, both from three years of net cat losses and things like social inflation and liability lines. We saw this performance translate into some positive pricing movement through ’19, but I would characterize this as moderate and quite inconsistent. 

The COVID-19 pandemic and the economic downturn that has accompanied it has really further increased this existing pressure on performance metrics. That’s certainly the case on the investment side, but we would now expect lower interest rates for even longer, and where we’ve all seen unrealized losses, especially from equity investment. 

But it’s also the case on the underwriting side. We would also expect reinsurance to take a further hit on performance from COVID-19 and recession-related claim. We’ve seen some of these claims come through, the first wave of claims come through in the first quarter. It has mainly taken the form of event cancellation and entertainment losses. But we would expect further claims to emerge through the years and the magnitude of that is really still very uncertain. 

The one line where we see the potential for claims, material claims, but also lots of uncertainty, business interruption, and I know we’re going to talk about that later, so I won’t really talk about it now. But there are the lines we keep an eye on, like credit insurance, both trade credit and single-risk credit. Again, here we haven’t seen material losses come through yet, but we should expect them to emerge later this year as bankruptcy increase. These lines are heavily reinsured, so we would expect reinsurers to carry a materiel share of the claims that emerge. Further into the future we would also expect claims from various liability lines, such as directors and offices, as we could typically see in a recession. 

If we look at life reinsurance, pandemic risk is a known and modelled risk, and I think even the most conservative estimates of mortality from this pandemic are far below what we see reinsurers model for their one a 200 year pandemic event. One of the things that mitigate the losses for reinsurers is the fact that most, their portfolios are focused on working-age populations, which are not the most vulnerable here. 

So we expect to see claims and we expect to see an impact on performance, and the level of claims we’ll see is still very uncertain, but we believe the severity will be manageable for most reinsurers. The reinsurance industry has run with excess capital for a number of years, and that gives them a buffer to absorb some downside, both from claims and investments. And importantly, this is also an industry that’s used to handling volatility. Just think about the level of net cat claims we can see in this level. 

Counter-acting the impact on performance is of course what we see on pricing at the moment. When we talk to reinsurers and insurers at the moment, we hear of a much stronger pricing momentum that was the case in 2019, and if that’s sustained, it will definitely help address the underlying performance issues of the reinsurance segment. At the moment the market hardening is helped by the general uncertainty in the market, which makes carriers more careful about where they deploy their capacity. So there is a question of how long this hardening will be maintained, but for now the pricing moment is a positive force for reinsurers. 

AM Best has a segment outlook on the global reinsurance segment, which is an indication of how we believe the current trends will impact the companies operating in the segment over the next 12 months. We have a stable outlook on the reinsurance segment going into the crisis, and we’ve maintained that stable outlook through 2020 to reflect the balance of the various heads and tail wins that’s based in this market, as I have discussed them briefly here. With that, I’ll hand back to Greg. Thank you. 

Greg Lockard: 

Thank you. Ditte, we heard from Mathilde some indications of some increased pricing, still possibly some over-capitalization in our market, and some reinsurers may be deciding how they’re going to allocate that capacity going forward. What is it from your perspective as the broker that’s involved in reinsurance placements? 

Ditte Deschars: 

I can only echo what Mathilde  was saying. Just looking back at the amount of capital that we have, it has been over-capitalized, and I think since 2015, the capital has grown by 4 or 5% on an annual basis. So I think we estimate it to be roughly just over $600 billion now. And we’ve been trying to look at what impact will COVID-19, with the asset side, have on the amount of capital. I think we’re saying maybe it will drop by roughly 10%, maybe $550 billon. Yes, we have a slide that you can see there. We’ve been trying to see what will happen with the amount of capital around. Just as an estimation, we said we were starting at roughly $600 billion, there has been a hit on investments, we see that. But I think the dip was really by the end of March, which when the industry went down by roughly over 20%. Whereas now it’s regained a lot, so I think we’re seeing that that is roughly -7% now. 

Losses are difficult to predict. There is really a wide range of COVID-related losses, and I think the difficulty is exactly what Mathilde was saying, we’re talking about so many lines of business and it will probably take well beyond 2020 to get a real feel for how big the losses are, but the ranges that we normally see now is somewhere between $30 billion and $100 billion, so quite big. And if we just take as a sensible estimation a mid-point of that to say what will hit the reinsurance industry, we’re saying maybe roughly 4% of capital will be impacted. So not a big, big capital hit, but still it will feel it. 

And again, I can only echo what we’ve seen in terms of the industry has struggled over the last years because returns have been below cost-of-capital, and I think that this has been the issue, but industry has not been able to do anything about it in adjusting the prices because there’s been so much capital around. In here we’re saying maybe we’re seeing roughly 3% underlying ROE will continue. 

Then we’ve been looking at dividend pay-out. And of course EIOPA in Europe has come out and suggested to the insurance industry that they should hold on with paying out dividends and take a more careful approach and guarding the capital. But some market we seen some of the large reinsurers have just said that we actually, one of the key cornerstones for us as an investment, to be an investment, is that we need to pay out dividends. So we say that we think that there will be less dividend pay-outs, but still there will be some, so we’ve said that that will be roughly 2% of capital. 

So even if we say that by the end of 2020 we’re going to see a roughly 10% dip, it’s still a well-capitalized market. I think that the health of the market is still there, but it needs to be adjusted, because of course now with ILS investments, and we’re going to lead on to that later on, the relatively cheap capital that we’ve had free access to, very good access to in the past year, is that will probably dry up a little bit, which could then put an additional price-pressure on the marketplace. I would say that the health of the market in general is good. I think this is something that we can weather, but there will be adjustments going forward. 

Greg Lockard: 

Andreas, I think that you would agree that we can certainly weather this. But from the reinsurance perspective, do you think there’s continued excessive capital sitting out there and we’ll continue to move through this with no impact? 

Andreas Beckmann: 

Fairly good question, I think. From what I see at the moment, there’s a certain cautiousness in the market, from the reinsurance perspective in two. Some reinsurers may reduce their writings a little bit, not very significantly from today’s perspective. But that will be a lot of discussions about what will be reinsured and what will not be reinsured, and I think that we will come to that at a later point. From experience, one would think that we would have a class 2020 of new capital coming into the market, but this will, I think, take a few more weeks to see, because at the moment we are in a situation where we cannot really say how big will the impact of this situation be at the end of the day. 

The reason for that is that we have different situation than in the past. In the past we either had a financial crisis or a recession situation, but that did not affect the insurance result that much because most of the times we were lucky not to have, let’s say, major natural catastrophes in the given year of a recession. Now we have a situation where we have A, large losses which are uncertain to a degree, because a lot of them are still under discussion. B, we don’t know how long this crisis will last. Everybody’s talking about a potential second-wave or third-wave and potential second lockdown. Let’s hope it will not come, but if it may come, then situation will change dramatically again. And C, and I think this is a very large effect, is the asset and the investment side, which is hitting all insurers, reinsurers, and financial markets to a certain degree. I just think it will take a few more weeks or months to see will the reinsurance market become very attractive for new capital or not. 

My prediction is it will become attractive because it’s unavoidable that there will be a change in the pricing segment, and therefore we could expect better returns on capital going forward. But as said, it’s a given uncertainty at this point in time. 

Greg Lockard: 

Thank you. I just want to remind everyone that’s out there to please use the question feature as part of this webinar service. If you have any questions for the panellists, please do ask those questions and I will certainly try to monitor that and queue those up. If we do run out of time, we will work on trying to answer those in another medium going forward. So Mike, if you would cue the next poll, which statement about reinsurance renewal pricing do you think is most accurate, given the current market conditions? We can poll the audience.  

So 50% of you believe there will be a short-term general hardening in rates, and maybe a little bit more profound is the fact that an additional 32% believe this may be the start of a period of sustained rate increases. So you put the two together, we’ll put 80% of you believe that there will certainly be an increase in rates and maybe some sustained level of rate increase. So appreciate everyone participating in that poll. 

We’ve heard a lot today about certainly a lot of uncertainty in the industry, certainly around COVID-19 and certainly the investment climate and the impact on assets and so on. Kimmo, what are you seeing in terms of as a reinsurance buyer, what are you seeing in the industry and any changing of the reinsurance marketplace since the 1.1 renewal season? 

Kimmo Heikinnen: 

I think that a few interesting things taking place, but one is that when you are meeting your reinsurers, quite many are often talking about partnership approaches and how they set companies in different categories in relation to how extensively they want to do business with them. It will be interesting also to see that whether they will be more diversified approach from the reinsurers side when they think that how and when and with whom they want to use the capital they have and how they employ the capital and how they price a reinsurance products for individual reinsures. That’s interesting point to see. 

The other interesting point which probably may be touched briefly later on also is that it seems that there is sort of little bit of revival of pools or similar type of arrangements where either there are reinsurance market or reinsurers or insurers or the states are sharing together such risks which are not considered possible to be carried by private companies only. That’s one interesting trend that do you see more of them, they are the initiatives and already some regulations in place or planned regulations for that type of arrangements. In the US for instance, how to take in those risks which have been materialized by COVID-19. 

I also believe that if you take care of your portfolio and how you provide the information and you make a point, you can have your reinsurances at reasonable rates. For us the situation is a little bit different because we have multi-year placements in place, so mostly we will skip the next renewals. For us it is very interesting to see how those trends will go and then a little bit more than a year later on we can then see how all has settled down. 

But I fully also agree with Andreas that it will take some time before you actually see what will be happening. And it reminds a little bit of what happened after 9/11, when the market was in complete turmoil, and then gradually it started to settle down when companies gained again the confidence to their business models. I think that is something that needs to be in place before everything really starts to go forward. 

Greg Lockard: 

Ditte, Kimmo mentioned something interesting there with some multi-year placements, and we’ve seen a lot of changes in the reinsurance marketplace in the last few years with some different reinsurance terms coming forward, certainly multi-year placements and certainly somewhat of a continued soft trend in reinsurance pricing. So if we look at the property reinsurance marketplace, at 1.1 renewal season, general consensus among some of the big breakage houses is that rates were up on a risk-adjusted basis of 4 to 5%. What are you seeing in the marketplace now with some of the mid-year renewal seasons coming through with the 4.1, 5.1, 6.1 and working through the 7.1 renewal season now? 

Ditte Deschars: 

Well I think we’re seeing, there’s three main components. One is the capacity. One is pricing. And one is conditions. It’s very much driven from where we’re talking. The Florida renewals are of course very different from the European’s renewal that we’re seeing. But if we’re trying to draw some common ground, there has been of course correction in price, but correction in price, if we’re looking at the US renewals, has been also very much driven by historical losses. They’ve been through two, three years of big hurricanes, there’s been wildfires, there’s been … So they’ve got some losses at the back and also quite reliant on ILS capacity. And I think that is the ILS capacity and the mechanism of the ILS capacity and that impact on our market, that will play a big role. 

So of course we’re seeing prices going up, but if we’re looking at the European renewals, from a pricing point of view, it’s been hardening as well. The prices have gone up, but of course to a much lesser extent. 

So I think where really there is a lot of focus is contractual wordings. That’s going to be a big topic in the upcoming renewals because reinsurers are, once you find yourself in a COVID-19 situation like we do, there is almost a sense a bit of panic. We need to limit losses and we need to get our exposures under control, and therefore a lot of focus is on understanding the underlying exposures, discussions with the cedents. Do they write or do they have in their book? And then how is that covered by the reinsurance treaties, and what types of exclusions can you accept and contra-accept? And of course if reinsurers are imposing exclusions, it takes quite some time to see what you can do on the original side of things. And there is that, Kimmo you were talking about long-term partnership and I think that is where that comes in. Lot of the relationships are fully longstanding, understanding each other’s business models, and assisting each other, and therefore some of the exclusionary language might need to, you can’t just be imposed straight away, but it will come over time. 

I think we’re going to see, but of course we’re seeing an impact of the mid-year renewals on all these levels. 

Greg Lockard: 

Andreas, you represent a pretty large reinsurance company and certainly some indications of pricing are going up, but what other changes are you seeing through some of the mid-year renewals in terms of potentially capacity or potentially some other contract changes that you see coming forward? 

Andreas Beckmann: 

What we see, first of all it’s quite a substantial price increase, some excess of loss structures. But as Ditte rightly said, this depends pretty much on the region. So the US markets are affected much, much heavier than the European markets because we are coming out of a few bad years already, and now comes COVID-19, and given the situation in United States, it’s little more uncertain than in other countries, to say it in a very nice way. That’s what we see at the first, drastic price increases. What I do not see at the moment is that reinsurers are strongly shying away, but what has an effect, at least that what I hear from some people who are voices from the market, is the effect of retrocession capacity. Some of the players are depending on retrocession because their underwriting strategy was strongly based on retro capacity, and retro capacities are quite short at this point in time and it’s highly expensive. So this automatically leads to higher prices. 

What I do not see yet as strongly but I expect it to come, is the discussion Ditte Deschars also mentioned about wordings, especially what’s in, what’s out. Very often you may ask a question, why are insurers and reinsurers, let’s say, a little bit surprised about their pandemic exposure? It’s a simple, but my answer to that is, they’re coming from 10-year soft market. Some of the wordings got a little weaker than they have been a decade ago, and especially events that have not materialized in the last years, let’s say, are worded in a different way than they have been in the past. 

Actually, pandemic situations shouldn’t be part of any insurers or reinsurers book of business, because it’s very, very hard to create a book that is defending itself against a scenario that is effecting more-or-less all lines of business and all areas in the world. So therefore you can reinsure to a degree, or insure to a degree, but you need sub limitations and all these kinds of things, and this is what will definitely come and I see very strong discussions in front of us on all sides, on the retro reinsurer side, brokers side. We have to find solutions to that because the uncertainty, that’s the poison. That’s poison for investors. No investor would like an uncertainty and say, “Oh sorry, we didn’t know that we had it. $100 million exposure.” That’s unacceptable, absolutely.

These are the effects I foresee. Short-term, higher prices because we’ve had more losses, but honestly speaking the prices would of gone up in any case, at the moment, because we are still swallowing the effects of the former years on the reinsurance market and in the effect market also on the primary side. So we need more money in the system, and it’s not a question of who gets more money, the reinsurers or the insurers. The question is the pot of money has to become larger, otherwise you cannot reinsure, insure, all these kinds of events we are facing here. 

At the moment we’re talking about COVID-19, tomorrow we many talk about the blackout scenario, and the day after we may talk again about a big cyber-attack. We have a lot of systemic risks in the business, and they’re getting more and more and the markets have to find solutions for that. They could either be totally getting rid of the risk, which I think would be a little odd because we are risk-takers and not risk-avoiders, but we also have to see how much money do we have to get, all of us, to finance the potential losses coming out of that. Short-term effect, mid-term effect, and long-term effect. 

Greg Lockard: 

Thank you. One of the things I always value about ICMIF webinars is certainly the different viewpoints from very diverse panel here. So we heard from Kimmo about really see no problem with stable reinsurance pricing due to relationships within the market. Ditte Deschars certainly echoed that, but certainly saw certainly an increase in pricing coming in. Then we heard from a reinsurance perspective, we need more money in the pipeline and drastic price increases. 

I’d like to cue the audience here with one additional question. How will reinsurance premium levels increase in the next renewals? What is your prediction? Do the question. (silence) Pretty good participation. We’ll run this a little bit longer. Okay, Mike, I think that’s good enough, and share the results, please. 

In general, we’ll just put the overwhelming majority somewhere in the 5 to 15% range, broadly speaking. So lightly majority in the 5 to 10% range. Another close second would be in the 10 to 15% range. And certainly some outliers out there on moving up. Although negative reinsurance rates was not an option, I think we would probably all agree based on this that we would see some pricing changes coming forward in the industry. 

So certainly a lot of talk around the COVID-19 pandemic, and certainly losses within the industry, or potential losses in the industry, both from a direct reinsurance marketplace and also the reinsurance marketplace. So if we quickly run through the panel on this, Kimmo, from a ceding perspective, how has your company handled the business interruption? Is this something that you’re offering due to the pandemic? 

Kimmo Heikkinen: 

In Finland actually there has been relatively little discussed about that. And in the publicity also, there has been especially through the restaurant and hotel branch, I’m discuss are related to that. How I understand it is currently is that we’re very firm that our products do not cover it. 

I think somewhere in the press I read a very accurate statement about that, and I think it came from US. I don’t remember the person who said it. But if you have risks which have not been priced in when the product has been bought, it is very unfair to urge those who are insured by those products and have paid for certain protection. So if the insurance companies are paying out losses which have not been priced in or not even considered to keep covered, either insert themselves at the time when the insurance was bought, then all that’s capital and all that value is taken away from those losses which actually should be covered. So if something major happens and the insurance industry is forced to pay out huge amount of losses which were actually not priced, all that is away from the next loss which should have been fully covered. 

And it’s very interesting also to think that at the same time the assets have been hit by the investment side and many companies it has a great value how they can operate. I think that that’s one perspective. 

For us currently, the BIs is not looking at the big issue, but as I said, there are huge amount of uncertainties related to BI losses. I think one of the key questions is and I think the US legal environment has been very active, and in UK they are testing that as well, what actually established the physical damage. That’s the key question to the whole. If that is somehow readjusted has it has been traditionally considered, it may have huge blow to the insurance industry. 

Greg Lockard: 

Ditte, Kimmo just shared an interesting point there. I mean certainly in the US environment there’s been a lot of discussion around contract language and actual physical damage to the property as a potential coverage trigger for this. But going forward, do you feel that some element of business interruption coverage, up to and including as a result of some form of pandemic, is a potential business opportunity for insurance companies? 

Ditte Deschars: 

I think it’s very early now, to say yes or no. Because at the moment, the whole industry is trying to just understand how big the losses can be. And of course what’s happening in the US where you can sort of retroactively go back and almost demand the coverage in a contract is not helping, is not helping this discussion. But I think you mentioned it before, Andreas Beckmann, we’re in an industry that is taking on risk and the key thing is that you need to be able to quantify it, and if we are able to quantify it and therefore put an appropriate price on it, then maybe it should be covered by the industry. But if we’re looking at silent cyber, if we look at post-9/11, terrorism was not available. Terrorism at that scale was just, this is not insurable. You couldn’t at all foresee that all these industries would be in line for business would be impacted by a terrorism event, and indeed they were. And that is now a very common product that you can quantify and you can price, and therefore you can underwrite. And maybe pandemic business interruption might go down the same route. I think potentially yes, probably a little bit early days now, immediately, but in the future, might well be, yeah. 

Greg Lockard: 

Thank you. Andreas, as a reinsurer, is this something that you want to support, and do you think it’s something that is sustainable? 

Andreas Beckmann: 

We have a lot of pending questions at the moment. Kimmo mentioned one of them. The business interruption following no property loss, is that insured in standard policies anyway? It really depends from market to market. We have markets where we foresee we will not have any COVID-19 losses from the property segment at all. Whereas others, predominantly UK and Germany and potentially United States, at least are in question. 

From the reinsurers perspective, there’s another element of it, and that’s the question about event covers and that is, from my perspective, not discussed yet. Again, very early days. And this will also be the same as what Kimmo said, from the primary side and the reinsurance side with the trigger, this will also be a game-changer if suddenly all this COVID-19 situation will become insured loss under events covers, which are originally created mainly for nat cat, but may or may not give situation reinsurers might be paying. Was that all included in the pricing? Questionable. Would be insured if we had the right price? Maybe yes, to a degree, we would get the right price. Maybe that should be the next question for the audience. 

With all these situations, I’m always a little, I wouldn’t say nervous, but it’s always the same. We had a big loss of terror, cat cats, COVID-19, the next one will come, and then flood. Everybody’s talking about that in the very moment. “Oh yeah, yeah, we have to create something and we have to pay for it.” And five years down the road, nobody wants to pay anything anymore. This is what’s happening over here. It’s like circle. Now we’re discussing this one. It is, to a degree, insurable with the right price, I’m convinced of that. Not fully and totally, everybody has to take a share of the risk. The original clients, the insurance have to take a risk. The insurers have to a risk, reinsurers have to take the … Retrocessionists have to take a risk. The governments may have to take a risk. 

But does the system work like that? That’s a good question. Is everybody willing to pay something for a risk he or she or they cannot see? It’s the question I’m raising because I had this discussion with other things also, and Ditte correctly mentioned terror. And before 9/11 there was not even a real market, and afterwards suddenly everybody was discussing it. “Yeah, we have to have cover.” And we have the same in Germany, after every flood, “Yeah we need, we need to cover for floods.” And as soon as the insurers, in this case, come up and say, “Yeah we have to take the price of X, Y, Z,” then people say, “Oh no, I think that’s rather expensive and I don’t want it and I hope for the government again next time.”  

Greg Lockard: 

Thank you. So we heard earlier in the call about reinsurance capacity, some elements of excess capital in the market, excess of $600 billion of capital in the reinsurance marketplace. Yet COVID-19 came in and the economic losses are in the hundreds of billions of dollars, and if that coverage were to be pushed into the insurance marketplace based on current contract language or even on a retroactive basis due to some legal challenges in some jurisdictions, could effectively wipe out all the capital that is in the reinsurance marketplace. Certainly that is a concern. Mathilde, we are discussing the business interruption piece and whether this is insurable, whether this is a business opportunity. Certainly questions around pricing adequacy, being able to measure the risk, being able to quantify the risk. I suspect those are some red flags for your industry as a credit agency perspective. 

Mathilde Jakobsen: 

I wanted to say first to add to what has been said before. When we talk to insurers and reinsurers at the moment, they are going through their portfolios to find out to what extent they have business interruption losses. It’s definitely not the case that there’s just no losses here. There are some policies where there are clear exclusions and it’s fine, and there’s some where there’s explicit coverage and that’s fine as well. And then there’s the middle part with lack of clarity in contract language. That’s the question of to what extent and in how many countries that actually turns out to be the case for. And we’re seeing some of these cases tested in European courts at the moment and hopefully that will give us more clarity on where these losses sit. And then of course we see reinsurers do the same, and I think there’s a real question of how these BI losses that appear, will be channelled up to reinsurers, to what extent reinsurance treaties will cover them and how the losses aggregate with retentions. I think that’ll interesting to see in the next few months. I think there’s potential for dispute risk here and a disconnect between primary and reinsurance markets. 

And then of course we’d expect, as people have said before, a tidy-up of language after this crisis, to be much more clear whether something like a pandemic is included or not. Is it insurable? Well, no. As you said, the losses we’ve seen, the economic losses we’ve seen from this crisis is well beyond what the insurance industry could cover. I think if it’s going to be covered, it’s going to be through some sort of public-private partnership, as we have also seen with other topics that sort of lie on the cusp between what’s insurable and what isn’t. And there are lots of these examples where the industry actually can provide some protection, although not all of it. I think we’ll see serious attempts at this, but I’m less sure about whether anything will actually come of it. As it’s also been said, memories are short, and you would need an awful lot of capital to actually make a dent in these economic losses, and so I’m not sure there’s actually capital for the industry to take significant amount of this kind of risk. 

Greg Lockard: 

Thank you. I’d like to shift gears a little bit. The reinsurance community has always prided itself for years and years as being a very relationship business, and certainly a lot of in-person relationships with various industry conferences and gatherings. This year already we’ve had the Rendez-Vous in September has been cancelled due to the COVID-19 pandemic, and NAMIC organization here in the US has cancelled all in-person events for the remainder of 2020. To my understanding, Baden-Baden is still outstanding as a possibility for later on this fall, but certainly I would think is certainly questionable at this point. 

I’d like to turn it over to the panel. How have these travel restrictions and cancellations of these conferences changed your business model in terms of marketing, client relationships, growth opportunities? In kind of a two-part question, do you think this is the beginning of the end for events like this within our industry? Kimmo, I’ll turn that over to you first as a cedent. 

Kimmo Heikkinen: 

Yes. I would say that it would be the end of the events like that and I would say some of that, what Ditte already once mentioned, is that when you have established and good conditions with your reinsurance, to work with them goes also online. But all the time there are new people coming on to those organizations and you also meet new companies, you hear about new companies, so when establishing completely new contacts, then it is more challenging and it is still much more easier, at least my perception, is that when you meet person face-to-face, even if you do it only once, it always easier, the communication in the future. Somehow it completely breaks the ice between the people. But so far everything works very well when you know your reinsurers and other people, you can contact them either by phone or by video conferencing like this. 

A quite interesting trend is that we have noticed is that it feels like people are actually using their phones now more for talking than before COVID-19. It has kind of returned back to the basics. At least I personally spent much, much more time on phone than before COVID-19. 

Greg Lockard: 

Kimmo, you mentioned an interesting point. Meeting somebody face-to-face is always a very good icebreaker to start a relationship. I kind of feel the opposite maybe the fact. We participate on these webinars and I have an opportunity to see spouses in the background and I meet pets and I meet children, kind of the ultimate icebreakers. This webinar may be on to something here. Ditte, how does this change your business? What are you doing with all your time you’re not traveling? 

Ditte Deschars: 

Exactly, we’re working. It’s interesting, because of course there is absolutely a value in seeing people and I think if we’re looking at Monte Carlo, somehow there will be a web Monte Carlo happening. And it’s not just to replace for the sake of replacing, it’s actually we really want to see our business partners before the renewal season kicks off, and therefore let’s try to do it. But you’re going to do the half an hours because then you’re going to die, so you focus on a few key meetings and probably a little bit longer meetings. This interaction and where you can see each other and understand where we’re all coming from, I think is incredibly important. 

It is a little bit the new normal. I think we have to accept that. So of course existing relationships, as you said, Kimmo, very easy, not a problem. It’s the new business production is making it a bit more challenging. But it’s almost because we don’t know when this is going to end, we just need to accept that this is the point, and I think that the good thing is that it was a global event, because it means that everybody is in the same boat, so nobody will think that it’s awkward that you have a new call with someone online, because we all know why. But of course it requires a bit more courage. 

On the other end, I think that the positive thing is that our industry has spent such an enormous amount on TME. Every time there was a presentation that was due to be delivered, you felt that you had to get on a plane and deliver it in person. And I think that we found that probably half of them, you don’t need to go there and fly there. You can actually do very well to do it online. And therefore you can be a bit more efficient. You can actually get a bit more in your work day than what we could before. I think that there are positive things coming out of this. And I think it will change the way that we operate in the future. That’s my take. 

Greg Lockard: 

Good. Andreas we heard that from Ditte, but I think in the preparation for this webinar you too mentioned that it’s relatively easy with existing relationships, but what are you doing or maybe what are you seeing in the industry in terms of engagement to try to look for some growth opportunities and touch with some new partners? 

Andreas Beckmann: 

The situation we are in, how I see it, most of the market wants to wish it away and hopes for return to what we had before. Why is that so? I think I’m somewhere in the middle between Kimmo and Ditte. Yes, for some meetings it really was questionable before if you should go into a plane, fly over to another country, have a meeting for one and a half hours, sometimes not even a good one, and then fly back home. That is potentially questionable. But for other meetings, it’s highly efficient, especially if you want say, combine it on a longer trip. 

So I think the focus, the insurers and the reinsurers are a little bit in a different position here. Some of the meetings, I think they will just vanish and we will do it remotely. But as soon as it comes to, and there are totally with both Kimmo and Ditte, as soon as it comes to new people, new meetings, to do that just by phone or via internet, via camera, that’s quite a tough thing, especially as we’re talking about products that also transport little bit of reliability and trust, there’s somewhere in between the lines and it’s always hard to trust an organization you don’t know, but it’s easier to trust people who represent the organization, because that’s a little bit psychologically how it works, I think. 

Coming back to the original question, what about Monte Carlo, I guess these are the things that will be going the last. I think what we may see, but that’s my prediction, we will see in September and in October, how much we miss them, not in a way of having a good time, but in a way of they’re extremely efficient. Within a few days, you meet so many people, you get so much information in between the lines. This will all be gone if you do it remotely. 

I personally get 50% of the information of the big conferences not through the meetings, but between the meetings and maybe in the evenings when I meet people more-or-less accidentally on the street or in a cocktail or dinner. And it sounds a little bit strange, but that’s the effectiveness of the given conferences. We cannot miss them yet because they have just been canceled, but the time when they would have been done, it hasn’t passed yet. If we do that one year, two years, three years, we will suddenly find out, oh, we should have these conferences because we miss the market exchange. 

And that is what’s changing I think. I think I’m very close to what Ditte said. A few of the meetings will just be gone because they are not efficient enough. Conferences, potentially get out of it even stronger. Maybe also with the different format, but I think there’s no exchange in meeting people, personally. 

Another point of that, it’s less the marketing thing, it’s more the internal marketing. How do you get people in the markets who have never been in the market? How do you want to do that? I’m talking both of the people who come newly onboard. On the moment we all know each other, to a degree, and this has also been mentioned. But what about the people who start now or who just started a year ago and they should do it four years, five years, six years down the road, and they have never been out, never got in touch with their clients. I don’t see how this should work in the future. So yes, there will be a fundamental change, but I see no total exchange from meeting personally. 

Greg Lockard: 

Thank you. We are quickly running out of time. It’s amazing how fast an hour does go. But Mathilde, I want to give you an opportunity to respond on that. AM Best certainly hosts a number of conferences, and certainly heavily attendees at a number of other industry conferences. Do you feel this could have a longstanding impact on your business model? 

Mathilde Jakobsen: 

Well I agree with what’s been said, so I’ll try to keep it short. It works this way. We can do video meetings instead of face-to-face meetings, it works, but it’s not as good. I think what has been a win, an opportunity, is the webinars. We’ve hosted more as AM Best than we used to, and we take part in more, and I’m hoping that that will actually reach a broader audience than we could with physical events. I think that’s a positive and I hope we keep that once we’re back to normal as well. 

Greg Lockard: 

That’s a very good point. I think we’ve found that within our organization that there’s different opportunities to communicate and there’s certainly some value that’s coming out of that. This is normally the point as the moderator where I would ask for everyone for a big round of applause for our wonderful, distinguished panellists here for their participation today. But frankly I don’t know how to handle that on a webinar. Everyone is muted so they won’t hear any clapping going on. But on behalf of everyone out there, I want to thank each of the panellists for their time today. Wonderful participation, wonderful content from each of you. 

Please if you have any questions, please feel free to email those to the ICMIF. We’ll work on trying to get answers to those if you do have any, and I will turn this back over to the ICMIF team. 

Mike Ashurst: 

Thanks, Greg Lockard. Excellent job moderating, Greg, thanks very much. Thanks again to all the panel.  

Greg Lockard: 

Thank you for everyone for participating and we hope to join you later in the week as well. Thank you  

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