Meeting last week and attracting nearly 1,000 delegates, the 12th biennial Singapore International Reinsurance Conference (SIRC) has come a long way since the event joined the industry travelling circus in 1990. So too has Singapore as a regional reinsurance hub. Back then there were plenty of reinsurers but many were small and ineffective; few brokers could be taken seriously; markets like China and Vietnam were closed; and customers in Japan, Korea and Australia stopped over only to refresh before flying on to London where they did their business. Today all that has changed and Singapore hosts a vibrant maturing market with depth in expertise, capacity and reach.
Singapore’s development as a reinsurance centre is one example of a global economy reshaped by connectivity. Internet technology and mobile telephony have transformed how businesses interact with their customers and suppliers. Today our clients can operate efficiently; sell their products competitively and access markets in ways unimaginable just a few years ago. Yet their world is now more complex, inter-dependent and fast-moving. They face new sorts of risk that can have sudden and devastating consequences. My address at SIRC on Thursday was on whether the insurance industry is innovating to meet the challenge of global connectivity.
The financial vulnerability of businesses to the external ‘connected’ world has been evident in 2013: on food companies following the media frenzy when equine DNA was detected in beef products; and on fashion retailers after the Rana Plaza building collapse in Bangladesh killed and injured so many garment workers. As a result of incidents like these our customers are now viewing the damage to intangible assets like brand and reputation as being a greater risk than losing or impairing physical assets; they want to protect revenue flows and profits as much as items on the balance sheet.
The shortcomings of traditional insurance solutions in tackling emerging risks are becoming obvious; those impacted by the horsemeat scandal could not claim on their product recall policies because there was no risk to human health. Too often the mainstream industry is seen to be in retreat rather than marching forward; the energy market’s removal of cover for accidental and malicious cyber incidents being a current example.
Fortunately a small but expanding group of enterprise risk underwriters have been more responsive, taking up some of the slack left behind in the traditional market. Interest in their new suite of products, clumsily tagged ‘non-damage business interruption’ is gaining some momentum with brokers and risk managers. Policies tailored to respond to reputational harm and trade disruption; insuring revenue flows and profit streams after a trigger event, like adverse media attention, are now available for a surprisingly wide and growing range of physical, political and financial perils.
The seeds have been sown but my message to the audience in Singapore was for the market to take innovation much more seriously. Greater collaboration between insurers, brokers and clients is essential; our service partners should invest in developing better models, especially for cyber and supply chain exposures. Above all we need a deeper pool of capital dedicated to emerging risks so that clients can buy the dollar limits that will make a real financial difference to them when they most require it.