Events, both in the UK and internationally, have markedly changed the geopolitical landscape in 2016. The world is now a less certain place and the UK’s position on the global stage is now less defined.
For the insurance industry the path is also less clear. It stands at a crossroads, with its very existence, at least in its current form, threatened by newer, more dynamic business models. Technology has altered many of the traditional risks which have been the London Market’s staple and new threats have not yet been met with a comprehensive response. Increasingly, many insurance products do not reflect the full extent of the threat or provide cover for the risks which concern risk managers.
The nature of the risks which insurers have traditionally been asked to underwrite has shifted and evolved in line with the threats faced by today’s businesses. The terrorism insurance marketplace is a case in point. Over two decades we have developed a robust response to property damage caused by acts of terrorism. We have been tested several times on this front and have shaped and honed our proposition. However, the horrific acts committed by Daesh (so-called Islamic State) and other like-minded groups have laid bare the gaps in the coverage offered by the market. Attacks on cities across the globe have resulted in large scale economic loss, significant loss of life, but very limited insured losses. This is unsustainable. This is an area in which we can do more to safeguard our economies and will be a key focus for Pool Re in 2017.
However, there are others, which will become increasingly apparent in the coming years and for which our industry may be ill-prepared. Some have already been identified and underwriters and broker have begun to incorporate the potential impact of climate change into the modelling for some risk classes. The rapid pace of technological advancement, with the development of virtual reality and alternative reality type products will also lead to new risks. Historically our industry has been slow to adapt to new technologies and tailor our products accordingly.
Cyber terrorism will undoubtedly be employed as a means of attack by terrorists. By including cyber in our property terrorism policies our market can set the standard for terrorism insurance across the globe. In 2017 Pool Re will expand its property damage cover to include damage resulting from a cyber trigger. Efforts such as this can make businesses in the UK safer and the insurance industry has a vital role to play in ensuring that Britain remains an attractive place to do business.