The workshop was mainly interested in large multinationals who are concerned with the volatility of their future cash-flows which are key to their market valuation. This means that insurers need to understand the drivers of the clients’ cash-flows to have a full picture of the uncertainties that could affect them and so differentiate those that could be insured and those that could not. To this effect Andreas Berger, a Member of the Board of Management of Allianz Global Corporate and Specialty, called for a “institution to institution dialogue” through which the insurer would be in a position to understand his client’s overall business.
In such a relationship, the insurance companies would need to have a “business analyst” capable of a global understanding of the clients’ activities. However, this could lead to the breakdown of the traditional lines of cover, which are usually related to events, and require a re-engineering of both underwriting and claims management.
With multiple lines of business involved in a potential settlement, there could be might be a solvency issue which required a regulatory stress test, Zurich CRO John Scott said in response to a question from audience.
At the same time, such insurance could reduce the volatility of the future cash flow, thus lowering the risk premium expected by investors and the rate for discounting cash-flows. This in turn would increase the long-term rating of the company.
To reach this “insurance heaven”, clients would need a better understanding of their potential loss scenarios, and the panelists agreed that the starting point would be to develop strong loss scenarios with the existing covers. Fred Kleiterp, CEO EMEA of Swiss Re Corporate Solutions, felt that reinsurers were probably best suited to have a global view of business.
Big data and analytics are required to assist in this development. Despite the massive availability of capital looking for new ways of diversification, reduced return on assets may limit the innovative capacities of the insurer, some of whom are still carrying the run-off of bright innovations of the early years of this century.