Sparro: Early client discussions key to managing inflationary impacts

The emergence of economic inflation is having a broad impact across underwriting portfolios, with early client discussions needed to understand the change in exposures and valuations, according to Sompo International’s Chris Sparro.

Speaking to The Insurer TV as RIMS got under way, Sparro, who was recently named CEO of North America for Sompo International’s P&C insurance business, said the addition of economic inflation to the mix on top of social inflation has a broader impact on how carriers are going to underwrite companies.

“Being able to have discussions with clients early in the renewal process, to understand that change in exposures, valuations of buildings … to determine what if any material change for that company’s risk has been impacted by inflation is going to be very important from an underwriting perspective in order to build a program that’s right for the customer,” said the executive.

The annual RIMS event – now known as RISKWORLD – has come at a time when a shift is being seen in market dynamics after three years of hardening of rates.

And Sparro said there is currently a greater sense of uncertainty around market pricing after the more uniform uptick of recent times, with an increasingly mixed experience by line of business and product.

“What you’re starting to see in the environment is a lot more of a view on the risk characteristics of an account, their particular loss history [and] the exposures that have changed year over year, whether that’s due to growth or due to loss activity.

“And I think you’ll find there is a lot more volatility around individual account rating based upon the risk characteristics of that particular company, as opposed to it being a clear line of a rate increase for a product … across the board because everything in that sector is underpriced,” he suggested.

The refocus on individual account characteristics could lead some insureds to look to change terms and conditions in their policy to address loss frequency if that is leading to price increases on their renewal.

Sparro said that pricing discussions should be relevant to severity of risk and not part of the frequency of “day-to-day transacting of dollars back and forth between carrier and company”.

“Quite frankly, [that] should just sit within the responsibilities of the insured itself,” he added.

Other topics Sparro covers in the The Insurer TV interview include: