The year of the unpredictable
The full extent of COVID-related losses won’t be known for some time, says Beach & Associates’ David Sowrey.
By Marc Jones, Associate Editor
2020 has been a year in which precedent after precedent was shattered and left by the side of the road as the year progressed. David Sowrey, Partner at Beach & Associates, told Reactions that it has been the year of the unpredictable; though the world has experienced pandemics before, COVID-19 has an unprecedented breadth of impact.
Looking on the bright side, Sowrey pointed out that from a working standpoint, the insurance industry has managed to adapt well to COVID-19, with people moving to a work-from-home environment with relative ease.
In addition, from a market/rating point of view, he feels that the coronavirus has served to accelerate the emerging hard market, especially in impacted lines of business: for example, healthcare, directors and officers, contingency and property.
However, Sowrey added some caveats. “There still remains uncertainty over the quantum of the size of COVID-19 related losses, for example in the property market where business interruption claims abound and we have seen dispute between coverage and non-coverage/exclusion,” he said. “This claims picture could be muddied further still by the impact of a second wave and accompanying lockdown.
“In some lines, such as event cancellation, it has naturally been much easier to determine the COVID loss impact, but overall we may not know the full effect that this pandemic will have on this industry for some time,” he added.
Going into more detail, Sowrey said that as the industry approaches the January renewals it is seeing a hardening market with rates increasing across several lines of business. COVID-19 has consolidated the nascent hard market of Q1 2020 and now the industry is potentially looking at a sustained hard market given the uncertainty of the length of the Coronavirus pandemic. 2020 has also seen multiple capital raises, and he thinks that it will be interesting to see how much/whether this additional supply of capacity dampens positive rating change.
According to Sowrey, hardening rates in key insurance lines will likely bleed into the reinsurance market, which could also be impacted on the “other side” by hardening property retro market conditions. With regard to the latter, he said that he has seen some evidence of the uncertainty over potential property losses leading to trapped retro collateral as retro clients struggle to evaluate their property treaty loss positions.
Sowrey said Beach handled the transition from office to working from home very well across all its offices globally, saying that its IT team did a “fantastic job” of making sure everyone in the company was set up and working as effectively and efficiently as possible within a very short space of time. Beach has maintained routine internal communication, with regular team meetings, town halls and even social gatherings on Microsoft Teams to ensure full connectivity throughout the company.
“Beach’s team culture is something we value highly so ensuring everyone remained in touch, felt included and connected was an absolute priority,” said Sowrey. “We also focussed on ensuring our relationships with clients and markets didn’t suffer from the lack of face-to-face time by maintaining regular contact over video calls. Our agility as a business has allowed us to communicate effectively both internally and externally since lockdown began back in March.”
Sowrey added that it seems inevitable that COVID-19 will change the way that members of the industry work once things eventually begin to return to normalcy. He pointed out that the London market benefits hugely from face-to-face interaction and whilst this focus will remain, COVID-19 has accelerated the use of modern technology-based working practices.
“The enforced reliability on working from home and video conferencing has shown the insurance business to be more 'portable' than most would have previously thought possible, and it deserves huge credit for that,” Sowrey concluded. “Clients and markets have generally received unbroken service, and in some situations even enjoyed greater trading efficiencies. COVID-19 has demonstrated that we don’t need to spend five days a week in the office to get our jobs done, rather we can work more flexibly and achieve the same, if not better, results.
“COVID-19 has also provided the industry with an opportunity to show off its creative product development side, as it tackles the challenge of managing pandemic exposure head on,” he added. “Several new pandemic initiatives have emerged over the past few months which should not only provide solutions to clients across the insurance and reinsurance spectrum, but also, importantly, demonstrate the great social value that our business offers.”
