With the conflicts in Ukraine and Israel still very much in the limelight, war risks and cover remain firmly in the insurance spotlight. The escalating nature of these risks, including piracy, terrorism, and political unrest has led to higher potential losses and increased uncertainty.

Following a recent discussion with industry leaders, we explored this very issue and why there is an increased demand for better data and a desire for greater transparency when it comes to exposure management.

 

Wake-up call

It was agreed that the Russia-Ukraine conflict has served as a wake-up call for parts of the market. Despite the strong likelihood of war in Ukraine for several years, the reinsurance market had no firm plans in place to address this, and it should have had a better handle on the utilisation of technology that already exists to adequately monitor and understand its own aggregations.

 

Inconsistency in the market

A major theme is the inconsistency around how the market approaches the various challenges, with Demian Smith at Guy Carpenter noting that at the recent renewals, “it was more reinsurance-driven than we’ve seen in a long time, rather than simply following the approach of the direct market to manage exposures.”

John Owen of AXIS followed this by pointing out that historically the market has tended to follow the direction of a leader but this time round, it was difficult to get consistency. “We have ended up with a patchwork quilt of coverage and that can be more difficult to manage,” he said.

 

Visibility is key

Coupled with the inconsistencies is the lack of transparency which is something that has perplexed me. Should it really take an event like the Russia/Ukraine conflict for the market to ask the question: “are we ok in doing that?” Although there is information and data that is captured and utilised for direct war underwriters, it is rarely communicated to the reinsurer, limiting their understanding of the exposure. What we need is a confidential share so that the reinsurer has a written number of quota share to help them understand the aggregate exposure without necessarily having visibility of which cedant it came from.