In the second our blogs on LMC Conference, we look at the modelling and aggregation of risks.  You can read the first blog here.

$50 billion has been wiped off FinTech’s recently and it appears that the 2020/21 valuations of Insurtech were overly exuberant. As a result, investors are nervous about later stage valuations in capital raising exercises going forward. Private Equity investors are committing less while third party capital conversations are difficult. 

Tech companies must differentiate their offering more clearly than before. Technology ‘opened doors’ a few years ago but today it has to ‘differentiate on the loss and expense ratio’ and deliver long term sustainable value, as one speaker put it.  There has been a shift to more “traditional” multiples compared to more recent valuations. However, this is the most exciting market for 25 years, albeit a market of resulting in as one panellist put it “more aggregate discipline globally that is being driven by macro events.” 

The fireside chat on where London is right now? extolled the virtues of EC3, which is generally seen to be a place to innovate and collaborate. Where are the opportunities? ESG and cyber market players should consider replicating the Pool Re model, “create a captive framework for onshore business,” and think “holistically.”  

If you can model and aggregate risks you will be more likely to provide a better solution to your clients. We need more product development and innovation. Do underwriters take enough risks? Probably not, and this is where London can differentiate itself by taking a lead from its past. 

Underwriters must work harder to understand their clients’ problems, their wider supply chain challenges, and “not just sell them a product.” 

Delegates on Day 2 of the conference heard that a ‘bifurcation of lead/follow is happening.” Underwriting leads should “get paid more” because they invest more in analytics and people. There is a great deal of work in progress to get the “algorithms right” with client-centric analytics needed as a differentiator. It is a real worry that underwriters “do not insure much boardroom risk.” 

There appears to be a lack of imagination to deliver solutions that meet the needs of board level clients. During the broker panel debate on the future of broking, one of the panellists mentioned that their major concern was the problem of “double keying data.” Another broker explained that data quality and generating efficiencies were their key priorities.  

Efficient and quality data is something that is important for every member in the insurance value chain, as Russell has been talking about for many years. Future industry solutions in the industry will be the ones that understand and harness that potential.