Leaning into uncertainty

QBE Re’s Peter Wilkins highlights the importance of being agile in an uncertain environment…

Every time you turn on the news, it seems like there is something happening that would keep an insurance professional awake at night.

The considerable number of uncertain events over the past few years, from the pandemic to the situation in Ukraine and beyond, has left much of the industry wondering if volatility is the new normal and prompts questions around how to thrive in such an environment.

From a property catastrophe perspective, the frequency and impact of natural catastrophes continues to be less predictable than previously modelled. Floods, wildfires and cyclone events certainly seem more frequent and devastating by the year.

In addition, we expect that the extremities of the current geopolitical environment will continue for the foreseeable future which will have a wide-ranging impact.

Topping off the list is inflation, which is driving up the cost of claims in many lines of business. And again, this hasn’t been limited to a particular country as it has in the past.

We can expect the costs of claims to continue to rise for the foreseeable and for the industry to be paying claims that are much higher than predicted.

“We have always dealt with uncertainty but what has made the impact of events over the past few years feel so different for insurers and reinsurers is that it has been systemic across the globe rather than isolated to a regional territory or line of business”

For example, supply chain issues have meant we have seen rebuild costs rise along with an increase in property values that will push up the costs of property claims.

We have always dealt with uncertainty but what has made the impact of events over the past few years feel so different for insurers and reinsurers is that it has been systemic across the globe rather than isolated to a regional territory or line of business.

The key issue for insurers is not that there are more events happening, but that they have a multiplied effect for the industry more than ever before. Our clients have more global footprints than in the past.

It is a tough environment, but there is opportunity for those in the insurance industry who are prepared to do things a little differently than in the past and lean into the uncertainty to come. Now is the time to focus on being agile. Rather than trying to pinpoint what is next, we should be ready to adapt and be prepared to react.

To achieve this, you have to acknowledge that you will need to deal with ambiguity. We can’t rely as much on past data and modelling to predict what is to come and we need to become comfortable with that uncertainty.

Make sure to look outside your business and take new ideas and learnings on board. What worked in the past for your organisation may not be the best solution moving forward. Look for ways to make uncertainty less impactful on your portfolio.

A healthy spread of risk across a wide range of geographies and business areas can help lessen the shock of an event, even in today’s systemic environment.

At QBE Re, we can bring a global and cross-sectional view to what our clients are facing today. We’ve recently reshaped our business so that it is simpler to deal with and can more readily meet broker and client expectations.

As a reinsurer, we are more joined up than ever and our size allows us to be adaptable, but we also have the benefit of being part of a large global organisation under the QBE group.

Peter Wilkins is chief underwriting officer at QBE Re