On June 1, MAPFRE Global Risks held its Global Risks Workshop, Global Market Insights, with brokers. This time, it was Bilbao’s turn to host the event, in an iconic spot that speaks to its industrial past: the Itsasmuseum.
This meeting with brokers, the format of which was characterized by a multi-directional conversation, was presented by José Antonio Ruibal, CUO of MAPFRE Global Risks, Javier Olías, DGT Norte of MAPFRE, Unai Baquero, CUO of Nacional Re, and Juan Antonio García, KAM of Global Business Development. It was certainly an opportunity to share impressions between insurers, reinsurers and brokers.
Juan Antonio García welcomed the act and introduced the session by mentioning forces contributing to the current situation: challenges such as inflation, the war in Ukraine, climate change and tension between brokers in the United States and China. By focusing on the realm of insurance, “we have been in a soft market for many years – although this can be discussed in the debate – and there has been a change in trend where we can say we are still, with capacity reductions, price increases, companies that have left the Spanish market and complex sectors such as food.”
Capacity and Nature’s risks
The reinsurance outlook was provided by Unai Baquero: “From a reinsurance standpoint, we don’t see the micro part, but in a portfolio macroanalysis we have an outlook on how things are going. We see that in renewals from 2022-2023 there is a noticeable harshness of the effect of nature’s risks.”The sector has an average of $110 billion of insured losses in this segment and, precisely, 2022 has been the fourth worst in history with $125 million since there are records. In spite of all of this, “the insurance and reinsurance market has the active alert in nature’s secondary events, which are the ones that have increased. We are able to respond very well.”
The capacity of the reinsurance market has been more restrictive, given that it is limited. In recent years, the modeling indicated that the losses were going to be higher. To increase this risk capacity, “there are a number of alternative capitals (the ILSs, Insurance Linked Securities) that remained constant until 2022, but with the inflationary effects and events of nature, they have receded. This alternative capability has returned to generalist investments to return to the previous status quo.”
Challanges
During that same year, in 2022, the reinsurance market began to see soft cycle outbreaks, under the reinsurance perspective, by Baquero: “Long-tailed risk, such as the consequences of Covid, has already been removed from the equation. We now understand that the councils will be required to address cyber damage, because there will be new loss experiences. So, to avoid trouble, we’re going to get ahead of the problems. Reinsurers are first. That is, we either address it or get ahead of it.”
On the new risks, Juan Antonio, the moderator reflected: “It cannot be that the insurance industry does not go along with something so necessary and socially accepted: energy transformation, recycling, circular economy, cyber risks… Are we up to the task?”
José Antonio Ruibal says there is “tremendous uncertainty” and that cyber risks “will have much more premiums than fire risk.” In terms of securing the installation of renewable energy, it concluded that insurers have to be, and to do so we get our engineers to review the risk, but there have also been many claims. To prevent them, recommendations are given, but we have to provide coverage. In this case, the job of the broker is essential.Political risks such as terrorism, riots, etc. were also presented in the debate, and how the restriction that is being given especially in Latin America due to changes in government. “Right now, you can’t find capacity. It’s true that they are usually located in large cities and not rural areas, and sometimes we lump them all together.”
Relationship with the broker
Toward the end of the session, a clear message directed towards the broker was put on the table: “This business needs the broker, and we like that. We like to promote the relationship with the broker, for example, in the Global Risks workshops. “If a company does things right, it has to explain them and the market has to understand it so that relationships are maintained,” one guest said. José Antonio Ruibal corroborated it: “That the company has a relationship with the insured party is not so common, but we have always encouraged it a lot. And always respecting the role of the broker, because it is essential since the customer, by itself, cannot go to the market to find capacity. And it should be noted that many times, the broker has acted as a screen between the company and the insured party.”
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