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While some traditional insurers may be concerned by the ever growing amount of third party capital piling into the reinsurance and insurance markets, both Andrew Kendrick, President of ACE European Group, and Mike McGavick, XL Group's CEO, said their industry must respond by boosting efforts to innovate and deliver for insureds.
Speaking at an Insurance of London (ILL) lecture in London, Mr Kendrick said the new capital means that traditional players must redouble their efforts on innovation and better service in order to maintain their market position. He believes the new competition from alternative capital demands a more creative approach from the traditional insurance and broking market.
Conceding that there is a 'sense of frustration on the part of some larger clients that the insurance industry seems unable or unwilling to innovate', Mr Kendrick therefore urged his colleagues to help risk managers tackle non-traditional risks caused by threats such as pandemics and increasingly complex supply chains.
He also said that insurers need to deliver superior service and a more client-centric approach. "A hedge fund cannot, at least on its own, act as a true partner to an insured, successfully providing consultancy, risk management planning and-in a word-service. So if we are to differentiate ourselves from the newer alternatives, then I believe that traditional players will need to become more customer-centric," he said.
"This isn't the time to pull up the drawbridge and retreat into the cosy comfort zone of the past. That approach may not lead to sudden death. But it could bring a slow, terminal decline. Instead, we need to take advantage of the opportunity that this new capacity brings to stimulate our risk appetite and creativity," he added.
Speaking at the Brokerslink Global Conference in Venice, Italy, Mr McGavick also said the new capital represents an opportunity for traditional insurers to realign themselves with client needs. He said insurers should look to harness the new funds for the benefit of insureds.
"I view this capital coming into our industry as an opportunity, not a threat. Supported by analytics and our deep understanding of risk, we must be adaptive in finding ways to use this capital to cover the long list of new and increasingly technology-related risks to respond to the unmet needs of a global economy," Mr McGavick said.
He said that being adaptive is 'key to survival'. "We must find a way to respond to new exposures and overcome the challenges, because it's only going to get tougher and not delivering is not an option," he continued. "Today risk managers and their boards are looking to you, their brokers, and us, the underwriters, for answers. And here lies our opportunity, let's take it," he told the Brokerslink conference.
Full article on Commercial Risk Europe