The latest edition of Swiss Re’s flagship Sigma report highlights how prevailing economic conditions have breathed new life into the global reinsurance market. Improved economic resilience and a rising interest rate environment are driving industry profitability, which in turn should help the insurance sector attract more capital – driving industry growth and expanding risk transfer capacity.

This expanded capacity is a critical fuel for the industry to narrow the global protection gap – recently recorded by Swiss Re at 5.2% year-on-year to $385 billion in premium equivalents. But in recent years, the increasingly interconnected risk landscape, which combines geopolitical, economic and regulatory concerns, has led to a growing recognition of the role that risk management must play in driving a more sustainable insurance market.

Supporting brokers and clients during market challenges

With three decades of experience in the sector, Adrian Hall (pictured), head of wholesale for the UK, Ireland, South Africa and EMEA at Swiss Re Corporate Solutions, has seen attitudes towards risk management evolve first-hand. He says that when he talks to corporate clients and the brokers who support them today, the message is clear – they want to find new ways to mitigate their exposure because they are aware of the “uncertain backdrop” against which they operate.

Geopolitical concerns are a top priority for businesses in a year when half the world’s population heads to the polls, but they are also surrounded by ongoing economic challenges, supply chain concerns, and the overarching threat of climate change impacting the natural disaster sector. It’s a “multi-crisis” environment, one that sees companies across industries grappling with what this means for them individually.

What constitutes the risk environment?

Two key themes emerged from Hall’s talks at Airmic 2024 and beyond. The first was climate change and its impact on natural deflation exposures. He pointed to the recent Sigma report and the protection gap it revealed as evidence of the ongoing nature of this challenge and how it is being compounded by the accumulation and growth of real estate assets exposed to deflation. “We are seeing exceptional inflationary pressures on real estate assets, which then magnifies the potential loss, from a natural deflation perspective,” he said.

The second theme is the pressures on the supply chain, due to the ongoing impact of the COVID-19 pandemic, as well as the geopolitical implications of conflicts in the Middle East and between Russia and Ukraine. These events create ongoing instability across the wider supply chain, raising concerns from a resilience perspective for large companies, which is unlikely to change in the near future.

Speaking about how he sees attitudes toward risk management and mitigation changing, particularly in the past five years, Hall pointed to the rapid advances in real-time data, digital-first approaches, and generative AI. Each of these factors has led to firms thinking more holistically about the solutions they need to manage the risks they face, a message he said is being skillfully conveyed by their broker partners. “Our brokers remain a very strong voice in the market,” he said. “By partnering with our brokers, they make it easier for us to listen to firms about the risks they face and deliver solutions that meet those challenges.”

What’s on companies’ minds today?

The question on companies’ minds is how do they navigate the complex risk landscape they face, and the answer lies in supporting them in finding a more holistic way of thinking about risk. It goes beyond risk transfer, Hall said, because when you move into the world of risk partnership and risk insight, that’s where companies can find solutions designed to guide them through this turbulent risk landscape.

In terms of what these solutions might look like, Hall identified three key areas of investment and focus for Swiss Re’s corporate solutions, the first of which is alternative risk transfer. He said captive companies, virtual captive companies and the creation of modular insurance solutions are two areas of increasing interest from large corporates, as they recognise the value these solutions can bring to their balance sheets.

The growing demand for risk data and services is another shift in the market as existing and potential clients alike are seen to be showing a keen interest in the role risk data can play in solving the most pressing risks they face, particularly around climate change and supply chain risk. A third area where Hall is seeing increased investment, momentum and success is around the organisation’s international business and its Pulse platform.

“If you look at the challenges that companies are facing now in terms of their global footprint, you realise the importance of having a clear overview of their coverages around the world and having a clear view of those policies, premium payments, claims, risk engineering services,” he said. “That’s where we see a lot of demand and need from the major companies… for us to step in and enable them to seamlessly handle their international programmes.”

In the face of so much uncertainty, Hall said he is encouraged to see how clients are taking into account what is happening in the broader risk landscape of investing beyond risk transfer and embracing what is available in terms of risk partnerships and risk insights.

Deep customer insights, drawn from a rigorous approach to client and broker feedback, are the way forward, he said, emphasizing the critical importance of listening to clients as key to developing a strong proposition. “There is a growing demand for more risk insights and innovative technology-enabled tools. This is where I have seen a shift in the large corporate space, and a growing interest in how large corporates manage their risks and look to the future in the current environment.”