IGI: 'This is the Perfect Time to Enter Contingency'
Concert halls, theaters and stadiums sat vacant during the pandemic. Insurers can help get the ravaged events industry back on its feet.
Richard Foster, head of Property, Political Violence and Contingency, and Emily Clapham, Senior Contingency Underwriter, at International General Insurance Holdings Ltd. discuss the market.
“People are taking this as an opportunity to correct the market”
“These social interactions are important for people’s wellbeing and we’re proud that insurance helps make them possible”
Why has IGI entered the contingency market – and why now?
Clapham: This is the perfect time in the market cycle to enter the contingency class of business, in the aftermath of the catastrophic losses caused by the pandemic.
The market has been soft for many years, juggling incremental rate decreases with broadened conditions. However, after the pandemic and the resulting high frequency of losses, rates increased two or threefold and coverage tightened. Quickly, the larger limits in the market were comparable to the overall premium generated from insurance.
One cover – communicable disease – eroded the entire premium pool for the class, which lead to many players leaving the market. IGI saw an opportunity and had the capacity to go back to those customers and help them to continue running events.
IGI thoroughly researched the market to gauge capacity, scrutinised the wordings, checked the products and pricing, and monitored the market cycle before deciding the class would fit with our broader portfolio and appetite.
What’s the current state of the events-cancellation market?
Clapham: It is still challenging due to the continued uncertainty around Covid. The resurgence of cases in the US is leading to an unfortunate sense of déjà vu.
The industry has suffered significant losses, but so have our clients. Many of them didn't purchase Covid cover and ran the exposure themselves. They are now trying to rebuild at a time when their insurance premiums have doubled or tripled and their coverage has reduced.
The resurgence of cases in the US is leading to an unfortunate sense of déjà vu.
From an underwriting perspective, the challenge is to stay relevant, and to provide a product that our clients will purchase at the correct price. It’s particularly challenging when clients have self-insured for communicable disease, paid out the loss and feel unfairly penalised. The continued uncertainty means there has been a rise in self-insurance as clients are loath to pay heavy premiums. We may continue to see an increase in some of the larger events self-insuring.
Everyone wishes the world would go back to normal, but we are still susceptible to government controls. However, we are seeing some events take place in the US, Europe and the UK and we’ll be ready for when everything finally opens.
What will help get the events industry back on its feet?
Clapham: We welcome the market’s professionalisation and are pushing for the inclusion of deductibles, particularly on outdoor events. Prior to Covid, you would have a distressed book of business with nil deductible, and that's no longer the case. People are taking this as an opportunity to correct the market, which means we should be able to continue as a viable class for many years to come, despite the existential challenges of climate change and potential economic downturn.
Foster: This class needs to invest more in the latest technology, and we are excited to see what opportunities insurtech can provide to help us in pricing risk, which will in turn enable us to keep prices at a point suited to our customers’ needs and tailor coverage to their budget.
We need more detailed and better data to help with risk assessment. For example, adverse weather is a risk for this class, but we have not moved away from historical data sources. We need to build a forward-looking way of assessing adverse weather risk.
What lessons has the industry learned from the pandemic?
Foster: Technology means we can more accurately track and monitor our aggregates, which must be the biggest lesson from the pandemic, when many carriers didn’t track their communicable disease accumulations. More accurate exposure tracking on any given day in any given location means you don’t have to build in any margin for error, and can effectively manage and diversify your account, resulting in higher profitability.
These social interactions are important for people’s wellbeing and we’re proud that insurance helps make them possible.
Another big lesson was that a virus has no boundaries. With a natural catastrophe we generally know when and where an event will start and finish, but with communicable disease that’s not the case, which is why it has generally been excluded. The industry has also learned how imperative it is to have clarity in wording. Intent is not enough – coverage should be spelled out in black and white.
What lies in store for the events industry and its insurers?
Clapham: The industry faces the continued challenges of adverse weather, as well as civil commotion and other socio-economic perils. There’s also the issue of increased sensitivity surrounding events, with clients and artists coming under much more scrutiny on ESG and diversity matters. Underwriters will need to adapt to navigate these changing social attitudes, and it will be a challenge to stay relevant in the face of these existential threats while still turning a profit and keeping clients happy.
There’s also the question of the long-term psychological impact of Covid on attendance at large events. While festivals targeted at young people, who are perhaps less concerned about the virus, will do well, the industry will inevitably change.
Foster: The events industry is huge, from village fairs to international festivals and sporting events. These social interactions are important for people’s wellbeing and we’re proud that insurance helps make them possible.