Technology Breaking Down Re/insurance "Coverage Gap" Barriers

At the Monte Carlo International Rendez-Vous of insurance and reinsurance, Swiss Re revealed that it believes some of the current improvements in the overall market environment provide a chance for the insurance sector to embrace new market dynamics such as the increased use of digital solutions.

Swiss Re said that while the current environment is still influenced by an abundance of capital, rising interest rates are having a positive impact on long-tail lines of business in life and casualty insurance as well as on the return profile of investment opportunities across the industry. Looking ahead, the continued growth of risk pools combined with the large and growing protection gap represents the most significant growth opportunities for the industry, according to the reinsurer.

Swiss Re's CEO Reinsurance, Moses Ojeisekhoba, said, "Although the market environment remains competitive with an abundance of capital, the long-term opportunities that lie ahead are positive as we address the very large protection gap that still exists."

Addressing the Challenges and Opportunities of a Very Large Protection Gap

The natural catastrophes in 2017 showed the importance of insurance coverage and once again highlighted the protection gap, said the reinsurer. It persists in emerging and advanced markets and across all lines of business—with a global estimated premium potential of $800 billion, said the reinsurer.

For comparison purposes, the Swiss Re Institute estimates the global size of the insurance market to be at $4.7 trillion. Roughly 2 billion people worldwide have no access to insurance, resulting in a very large protection gap. Therefore, a real potential for the re/insurance industry exists to support the global population, it said.

Global natural catastrophe losses totaled $2 trillion over the last decade, 70 percent of which were uninsured, according to Swiss Re Institute estimates. Further, it said, uninsured losses from natural disaster events are expected to exceed $150 billion annually, underlining the need to close that gap and help societies better protect their people and assets against risks.

The reinsurer said such statistics are sobering, and for re/insurance to make a difference, the industry must seek to address the key drivers that help create this gap, such as lack of awareness, access, affordability, and understanding as well as product design elements. In this context, having close client relationships, offering know-how and expertise, and supporting clients with large transactions as well as new, innovative, technology-driven solutions will be critical for success, according to Swiss Re.

The reinsurer asserted that advancements in technology are expected to bring many benefits to the re/insurance industry across the whole value chain (i.e., distribution and sales, underwriting, claims, solutions and services, and operational backbone). Technology is also changing the nature of risk itself—both mitigating and creating new categories of risk, it said.

Mr. Ojeisekhoba said, "In our view, trying different solutions aimed at addressing the protection gap is the only approach that will make a material difference. We already see that various elements of new technologies afford us an opportunity to break down some of the barriers."