Swiss Re: Technological progress will change business models
These trends will challenge the industry to adapt quickly in order to provide greater value to customers and enhance resilience on a global scale. Reinsurers and insurers should work together to manage and profit from these advances.
Christian Mumenthaler, Swiss Re's Group Chief Executive Officer, says: "It's a special year this year, as it's the 60th anniversary of Les Rendez-vous de septembre. The industry has experienced many changes in this time. It is our goal to partner with our clients to help them tackle new markets and emerging risks also in the future. Being at the centre of the technological transformation that is unfolding is a key part of the strategic framework we launched last December. With our knowledge and differentiation we want to seize the momentum so we can help our clients adapt and thrive. I'm proud to say that Swiss Re has been at Monte Carlo from the start in 1957 - being a strong partner for our clients and working together on smart solutions."
Advances in technology will change business models
Technological developments will profoundly change the way in which the re/insurance industry develops, distributes, underwrites, and administers the insurance protection it sells to consumers. New technologies such as cognitive and cloud computing as well as big data will simplify and accelerate the industry's underwriting process and reduce the price of insurance protection overall. This development will allow insurers to tap into the vast insurance protection gap and build up new revenue streams. The biggest sources of value creation will be in reducing costs and creating completely new services.
The main catalysts for change include: mobile-first preference from the end consumer (e-distribution), increasingly dynamic and regular consumer interaction with computers (digital advisors), an exponential increase of data on people and objects (e.g. Internet of Things, telematics), the common and secure use of distributed data (blockchain technology), and the ability to recognise patterns in large and unstructured data (artificial intelligence). These technologies are expected to shift risk pools and create new opportunities.
Technological transformation part of Swiss Re's strategic priorities
Unlocking attractive new risk pools is part of Swiss Re's strategic framework, which combines the Group's financial strength, client relationships, and its status as a knowledge company. Within this framework, Swiss Re's core strategic pillars enable the company to pivot and respond to new realities in order to offer appropriate and optimal solutions for its clients.
Swiss Re is running numerous use cases and is building up research and development units utilising complex digital analytics in order to offer actionable research and transformational opportunities. In addition, it actively invests in creating product offerings for new and peak risks arising from technological advancements like telematics, cyber and accumulation risks, while bringing outside innovation into insurance through accelerators. Its initial technology investments include stakes in wearable physiology monitoring company Biovotion Ltd and personal data start-up Digi.me. Swiss Re is also active in the insurtech ecosystem and has launched its own accelerator programme in Bangalore, India.
Tailored transactions gain in importance
By applying the strategic framework, Swiss Re also aims to steer its portfolio to focus on large deals and underwriting discipline. In the short term, Swiss Re will increasingly focus on large and tailored transactions, which rose by 76% in the first half of 2016.
Such deals are expected to continue to grow in importance relative to the traditional flow business. Swiss Re is uniquely placed for such transactions and offers sizeable capacity and a long track record of execution on large and tailored transactions across all lines - property, casualty and life and health.
Price levels expected to stabilise
The second quarter of this year was a reminder that natural catastrophes can happen in clusters, and this experience, combined with several years of decreasing prices, shows that the industry cannot be too far away from the bottom of the cycle. Looking ahead, Swiss Re expects price levels however to stabilise.
Price erosion in natural catastrophe cover is expected to slow down and stable rates are anticipated for the property per risk business. In liability lines, Swiss Re expects pressure on reinsurance rates to abate, while broad rate increases are possible in the case of deteriorating reserve adequacy across the industry. In specialty lines, Swiss Re expects differences in price developments by market and lines of business. High Growth Markets will drive long-term exposure growth. In Motor, overall slight hardening is expected with differences by market. Increased loss trends have continued in the US, but accident frequency in the long-term is expected to decrease.
Swiss Re intends to maintain its focus on underwriting discipline to preserve long-term sustainability, and on reaching under- and un-insured populations to enhance total demand for re/insurance overall and thereby making the world more resilient.
September 12th, 2016