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2022 Challenges Include Cyber, Pandemic and Climate Change

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Don Pollard Photography

Cyber, natural catastrophes and the ongoing pandemic are top of mind for executives attending the Joint Industry Forum in New York.

What do you see as the biggest challenge for the insurance industry in 2022:

Sean Kevelighan, president and CEO, Insurance Information Institute:

In a lot of ways, what COVID taught us through the likes of the business interruption news cycle that we faced, is we need to get ahead of these issues. In terms of climate, in terms of cyber, how can we get ahead and make people understand, as we've been talking about the role of insurance, the role of others, the role of the customer, these things need to be informed so that there are less surprises when things are going to happen. We knew a pandemic was going to happen. We know that business interruption insurance does not cover a pandemic. But we also need to inform those discussions, I think we can get ahead of them now. And that's going to be a big challenge that we should overcome this year.

John K. Smith, president and CEO, Pennsylvania Lumbermens Mutual Insurance Company:

I think as an industry, we have COVID and non-COVID challenges. So let's start with the COVID-related challenges. I would look at them for both the insurance company standpoint, and from our insureds' standpoint. Hopefully, we're all going to return a little bit more to normalcy, although the most recent variant, I think, has got us all question that. But we have to come up to address that challenge of getting back to where we were, does that mean bringing employees back into the office? And if so, what protection do we have to provide to them in the office? And how does that impact our insurance? Either personal lines insurance, or in our case, commercial insurance? So from that standpoint, I think COVID adds a lot of texture and a different dimension.

As we come into the new year, obviously, we've had a bad weather pattern, which we've already chatted about a bit. Does that continue? And I would suggest that it would continue. You know, we talked about wildfire a lot as an industry. And we talked about wildfire areas. My concern is not the areas we talk about my concern is the areas that we're not thinking about from a wildfire standpoint. We learned that last year with a deep freeze in Texas. If somebody had said, what's the chances of a freeze in Texas, the year before? I think very few people would have pointed that out. So the question have to ask yourself is what is the next event that falls into that pattern, that we're not thinking about that comes along. And that to me is part of a ERM process.

Gary Grose, president, Commercial Specialty, Argo Group:

It's going to continue to be the people issue primarily, you've got to take care of your folks. You got to look out not only for their comp, they're making sure they're not departing, but their mental health — both for them and their families and loved ones. And I think that that's been possibly a real nice thing about the pandemic is that a lot of companies [are] paying more attention to folks on an everyday level and caring about what they're doing more and more. That's real positive. The second thing is going to continue to be rates in areas that were needed. So casualty, financial lines, etc. Everything I'm hearing sounds like the rate will continue on for a while, a lot of inflationary impact on that. But we've needed right for a long time in our industry. And so it's positive that we'll continue on first for some time in 2022.

Paul Horgan, head of North America Commercial Insurance, Zurich Insurance:

I think the the biggest one you might hear from a lot of people is cyber, but to me, the biggest one for us and for our customers is tort reform. The fundamentals that have driven the challenging excess casualty market have not gone away and I think this is the year that industry and our customers are finally going to partner and work for some legitimate legislative reform, to really kind of take the some of the challenges in excess casualty and find some relief.

Catherine Mulligan, global head of cyber at Aon's Reinsurance Solutions:

One of the biggest challenges facing the cyber market in 2022 will be increasing the credibility of modeling. We have a lot of good vendors who are out there thinking about the issue — actuaries, cat modelers — bringing a lot of points of view. But I do think that those models need to continue to develop so that insurers and reinsurers alike have increased confidence in their output.

Chris Beck, managing director, Milliman:

The biggest cyber challenge is first continuing to respond to the increase in ransomware attacks, understanding how those attacks are going to change. And then looking at the decisions that insurance companies are making, whether they're going to continue to write contracts that will help companies transfer risk by making payments if that company makes a payment to somebody who has conducted a ransomware attack. And similarly looking at if those rules — because I think it's a different set of eventualities as opposed to an insurance company making those decisions — if we start seeing rules and regulations changing from government regulatory bodies, on guidance, or even more strict requirements on whether you are allowed to or not allowed to pay a ransomware attack. All that comes under the umbrella of in 2022. We are very likely and very hopefully finding out what the normal will look like in a post-COVID world in our working places. So how are we going to be working? Where are we going to be working from a cyber point of view, those create endpoints and vulnerabilities and different sets of endpoints and vulnerabilities. Depending on what those decisions are.

John Huff, CEO, Association of Bermuda Insurers and Reinsurers:

We still have a challenge of making sure folks understand the value proposition of the insurance and reinsurance industry. So right now, there's so much emphasis on climate —where we just came out of COP 26, and an awakening of people of the changing weather patterns driven by climate change, climate risk. But really, we need a better understanding that we've been in climate before it was cool. For decades, particularly the Bermuda market has been a leader in natural catastrophe risk transfer. And so the expertise is there, the modeling, the analytics, so making sure there's a full understanding of what we bring to the table in this discussion.

Michel Léonard, leader of the Triple-I's Economics and Analytics Department:

The first issue is the ability for replacement cost to come under control. Inflation is very high on all of the key items for us, on cars, labor, and home, lumber, and so forth. The second one would be for growth to pick up in those markets that matter to us. Right now, growth in construction and car sales is below the national average. As a result of that, homes need to be completed for us to be able to insure them. Cars need to be sold for us to be able to insure them. The supply chain issues need to come to terms so then that will solve a lot of the growth, the growth will be able to happen. Folks are waiting for cars and homes. And also inflation prices will come in a line and we think it's going to happen by the end of next year, following year. We're going to be aligned for peak economic growth, and the economic growth will be aligned for peak insurance growth.

Peter Miller, president and CEO, the Institutes:

I always look at challenges in terms of the flipside: opportunities. I think the industry continues to have to really tell all the great things that it does in order to get talent. I also think the industry needs to continue to be aware of the data challenges. And there's also some things like social inflation, runaway litigation, risk-based pricing — I think those are some challenges where there's some external forces that are coming into the industry. The industry needs to be very aware of those, very early on and continue to be vigilant about how that we can get our message across in a more effective way.

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