ICA WELCOMES NEW GOVERNMENT LINE-UP

Prime Minister Anthony Albanese has appointed Stephen Jones as Assistant Treasurer and Financial Services Minister and has given climate change and cyber security portfolios an elevated focus within Cabinet.

Murray Watt has been named Minister for Emergency Management, continuing in an area of responsibility held in a shadow capacity, while Chris Bowen has been appointed Climate Change and Energy Minister and Clare O’Neil becomes Minister for Cyber Security.

Mr Albanese announced the Ministry full line up after some key appointments, including Jim Chalmers as Treasurer, were confirmed before his trip to Japan for the Quadrilateral Security Dialogue meeting.

The Insurance Council of Australia (ICA) says in the main, new ministers will provide continuity from Opposition for the sector, and it looks forward to working with Mr Jones on the implementation of the Northern Australian Reinsurance Pool, among other matters.

“There are no shortage of issues confronting ministers in portfolios that relate to insurance, and the ICA looks forward to continuing our work with those minsters we know well and those new to our areas of interest,” ICA CEO Andrew Hall said.

Labor’s commitment to $200 million a year in mitigation funding, matching spending sought by ICA, was announced in January by Mr Albanese and Mr Watt ahead of the federal election campaign.

“There has been a stunning lack of development in [SMEs’] thinking and approach to cyber security.” Cameron Research Project Director Ross Cameron on SMEs and cyber.

TRIBUTES PAID TO GRAHAM STEVENS

The broking industry has continued to pay tribute to Edgewise Director Graham Stevens, pictured, who died in May following a battle with cancer.

Mr Stevens, most commonly known by his nickname “Bear”, was President of the National Insurance Brokers Association (NIBA) in 2014-15, and also served a two-year term as President of the World Federation of Insurance Intermediaries.

A celebration of his life was held in Melbourne on June 3, and the winner of the NIBA Broker of the Year Award for Victoria/ Tasmania will from now on receive the Graham “Bear” Stevens Trophy.

Steadfast MD Robert Kelly told insuranceNEWS.com.au Mr Stevens had been a business associate and personal friend for almost 40 years.

“We were like brothers,” he said. “Graham was one of the foundation shareholders and board members of Steadfast.

“He was one of the most generous people in terms of the time he would give to younger people. I always found him trustworthy, and honest in his criticism or praise about anything that I asked him.

“He was also the consummate gentleman and a family man, and he had a wide range of friends at all levels.”

Mr Kelly says Mr Stevens was “a great advocate” for small and medium sized brokers in Australia, even though he was doing deals at the highest level.

“He had a drive to make sure that people who needed advice got it in a way they could understand, and that there was transparency on remuneration. If you want an example of what an insurance broker should be, Graham was the epitome of it.

“He got his nickname “Bear” because someone thought he looked like a fuzzy bear and the name stuck. It was a term of great endearment for those who knew him well.”

Mr Stevens is survived by his wife Norma, daughters Rachael and Melinda and two grand- daughters.

FLOOD LOSSES PASS $4 BILLION

Insured losses from the re- cord flooding in Queensland and NSW earlier this year have climbed to $4.3 billion to be Australia’s fourth costliest dis- aster, the Insurance Council of Australia (ICA) said.

The estimated losses – nearly double Brisbane’s 2011 flood’s $2.3 billion – are from 216,465 claims across both states.

More than a fifth of claims are already closed and almost $1 billion paid to policyholders so far.

The huge catastrophe bill – which is the highest recorded for an Australian flood event – is only overtaken by the 1999 Sydney hailstorm ($5.57 billion), 1974’s Cyclone Tracy ($5.04 billion), and 1967’s Cyclone Dinah ($4.69 billion).

The 1989 Newcastle earth- quake recorded $4.24 billion in insured losses on a normalised loss basis – a way of calculation to give a present-day perspective of historical events.

The jump from the ICA’s previous estimate of $3.4 billion was due to claims progressing, as well as an increase in larger commercial claims.

From February 22 to March 9, intense and sustained rainfall led to flooding from Maryborough in Queensland down to Grafton in NSW. Many areas received more than half their average annual rainfall in just a week.

RAIN HERE TO STAY

Climate drivers in the Pacific and Indian oceans are pointing to an increased chance of above-average winter rainfall in eastern Australia, the Bureau of Meteorology says.

The bureau says all the climate models it surveys suggest a negative Indian Ocean Dipole (IOD) may develop in the coming months, while two of seven models say La Nina conditions may continue through the southern winter.

“Even if La Nina eases, the forecast sea surface temperature pattern in the tropical Pacific still favours average to above-average winter rainfall for eastern Australia,” the Climate Driver Update says.

A negative IOD is associated with the chance of above average winter-spring rainfall for much of Australia, as well as warmer days and nights in the north.

“While model outlooks have low accuracy at this time of year
and some caution should be taken with IOD outlooks, there is strong forecast consistency across inter- national models,” the bureau says. “Outlook accuracy for the IOD be- gins to significantly improve during June.”

The IOD is the difference in temperatures between the west and east tropical Indian Ocean, which can shift moisture towards or away from Australia.

Negative phases are more likely to coincide with a La Nina and can have an impact from May to December, the bureau says. Australia had its wettest year on re- cord in 1974 when a negative IOD coincided with a La Nina.

The current La Nina, which has brought heavy rainfall and catastrophic flooding to NSW and Queensland, is the second in two years. Consecutive events were previously seen in 2010-2012.

FEARS OVER MOULD OUTBREAKS

A surge in mould outbreaks caused by conducive weather conditions in southeast Queensland is causing chaos for homeowners and could complicate insurance claims in the flood-hit area.

Australian Apartment Advocacy (AAA) says it is receiving hundreds of calls for assistance but warns insurance will only cover those affected if the problem is caused by flood or storm water.

“The reports we are getting is that the incidence of mould in southern Queensland is almost unheard of due to the current conditions of humidity and moisture,” AAA Director Samantha Reece said.

“The bad news is that mould itself is not covered by insurance generally unless it has been caused by an insurable event such as storm damage or flooding.

“We have had hundreds of apartment owners contact us and our message is the same; check your insurance policy but it is highly unlikely you are covered for mould unless you have suffered or experienced an insurable event such as structural damage caused by flooding.”

Repair and remediation services used by insurers, such as Steamatic, have seen an uptick

in demand, and they expect it to continue.

“There has been a moderate uplift, but we are expecting this to increase over coming months due to lack of immediate drying due to volumes of claims and available resources,” Steamatic CEO Oliver Threlfall tells insuranceNEWS.com.au.

Suncorp Head of Flood Response and Recovery Cath Stewart says mould presents a key challenge following flooding, especially in areas such as south-east Queensland.

“Mould is a key challenge following any flood, and this is the case in south-east Queensland,  especially  given the ongoing wet weather.”

RACQ Insurance prompted homeowners to take early action against mould growth.

“If mould issues are picked up early the cost, on a per claim level, isn’t likely to be significant, however if the mould is left to grow for an extended period of time, then this can increase the cost, both in terms of cleaning and replacing con- tents,” it said.

“If there is a significant in- crease in the number of proper- ties requiring additional remediation due to mould, then this has the potential to place additional strain on the insurance sector and its supply chain.”

INDUSTRY SLUMPS TO NET LOSS

The general insurance industry slumped to a $428 million net loss in the first three months of the year, as the February/March floods drove up gross incurred claims, Australian Prudential Regulation Authority (APRA) statistics show.

The industry made about $100 million in net profit in the prior December quarter.
APRA says gross incurred claims “were significantly higher” in the March quarter, rising 47.6% to $15.4 billion from the October-December period and the gross loss ratio worsened sharply to 99% from 61%.

A 4.7% decline in gross earned premium to $14.9 billion also took a toll on March earnings.

Weaker investment results made another dent, with the industry booking a
$1.6 billion investment loss during the quarter, worse than the $300 million deficit recorded in the December quarter.

APRA says the “large in- vestment loss” was driven by a rise in bond yields during the quarter, resulting in unrealised losses on interest bearing investments.

The industry performed better on a yearly basis, with net profit up an annual 16.7% to $1.3 billion for the 12 months to March, the APRA data shows.

CHUBB NAMES DISTRIBUTION HEAD

Chubb  has  appointed Demetra Day as Head of Distribution for Australia and New Zealand, effective from the start of July.

Ms Day has 30 years’ experience in the insurance industry and has held several senior leadership roles since joining Chubb in 2000. Most recently she has been Head of Major Accounts.

“Demetra is a highly respected leader with a solid track record of success at Chubb,” Country President Peter Kelaher said.

“I’ve been impressed by her disciplined approach to building our major accounts proposition and have no doubt this experience will help her succeed in shaping our distribution strategies and managing our broker relationships as the new Head of Distribution.”

Chubb says Ms Day built the major accounts division from scratch and developed a strong and diverse team. The division was established in 2018 to service large and multinational clients and business partners.

Ms Day’s previous roles have also included Financial Institution and Commercial Crime Underwriting manager, Asia Pacific and Head of Financial Lines in Australia and New Zealand.

Chubb Head of Global Broker Unit Australia & New Zealand John French has been acting in the head of distribution role, following the resignation of previous incumbent Jason Hawksworth, who now works as General Manager Distribution for Allianz Australia.

A new federal government and new ministerial line-up brings an opportunity for a new approach on some key insurance issues. And as the fallout from this year’s record-breaking floods demonstrates all too well, some fresh thinking is required.

The insurance industry has said for so many years that we can’t keep rebuilding in the same ways, in the same places, and expect different results.

Deputy Editor Wendy Pugh’s article in this edition of Insurance News magazine outlines a different path, which could lead to a much brighter future for many hard-hit communities. All options need to be considered, including – in the most extreme circumstances – relocation.

It would take a concerted effort from all levels of government, the insurance industry, businesses and homeowners – but with climate change impacts becoming increasingly severe, doing nothing is not an option.

Meanwhile, the economic challenges for the new Albanese government are all too clear, with newspaper headlines full of stark warnings about rising prices, rising interest rates and corresponding falls in consumer confidence.

But as Swiss Re points out, it might not be all bad news for the industry, which has proven its extraordinary resilience through the covid pandemic.

Among the many talking points buzzing around the industry at present is the long-running and ultimately damaging war for talent. The economic environment, which in Australia features extremely high employment, plus the continuing impact of covid-induced border closures, means companies across the industry are finding vacancies are harder than ever to fill.

But as our article on page 32 explains, there’s a positive message here too, as insurance looks to tap into “the great reassessment” and draw talent across from other industries. Insurance offers great career opportunities – and it’s about time we got that message across more effectively.

Lloyd’s is on the front foot again as it aims to guide the industry through post-covid changes and challenges

By John Deex

Since 1688 the venerable Lloyd’s market has been a pioneer of insurance coverage, and breeding ground for new ideas.

Now, after a period of remediation and covid-induced limitations, Lloyd’s is looking to reclaim its reputation for innovation.

It’s also prioritising growth again – but sustainable growth – while carrying out a comprehensive modernisation project at the same time as bringing through vital improvements in diversity and culture.

A vision of a post-covid era Lloyd’s is emerging, and Australia plays a key part.

During Insurance News’ visit to the iconic Grade 1-listed Lloyd’s building in London’s Lime Street, Chief of Markets Patrick Tiernan confirms the local market is of “paramount importance”.

There’s some debate over whether it’s the third or fourth largest Lloyd’s market (Canada may have nudged ahead), but Mr Tiernan says it’s not just about size.

“The size of the premium is very important, but the relationships with the customers and the roots we have in Australia are deep,” he says.

“The relationships we have with regulators and distributors on the ground are very important to Lloyd’s and we [cherish] them dearly.

“I’m desperate to get to Australia this year to demonstrate how important it is to us from a markets perspective.”

Lloyd’s took a long, hard look at itself in 2018 and 2019 as profitability plunged. It pledged to crack down on underperforming syndicates, and avoid “bad business”.

In the words of then recently installed Chief Executive John Neal in January 2019, Lloyd’s vowed to never again “allow our hand to slip from the tiller and let the market drift into stagnant waters”.

This  focus  caused  some  issues  in Australia, as Lloyd’s capacity was harder to come by in certain sectors, but Mr Tiernan says that “necessary phase” is now finished. “I wouldn’t call it retreating, I think it was just taking a look at the book and ensuring that there was sustainable profitability that would maintain our strength with regulators, with rating agencies, and with customers.

“We believe that a lot of that remediation has been done and done well by the Lloyd’s market, and that 85% of the syndicates have earned that right to look forward through a different lens – through the lens of looking to grow, but grow sustainably.”

Sustainable is the key word. Mr Tiernan is adamant that the last thing the market needs is to undo the good work of the past three years, requiring another correction in years to come.

“What the market is focusing on and what we’re supporting is sustainable and profitable growth.

“I think it’s fair to say that for those syndicates and managing agents that have demonstrated that record of profitability, they’re not being held back by Lloyd’s.”

Growth for Lloyd’s in Australia has been outstripping the average, and Mr Tiernan sees plenty of opportunity.

He says Lloyd’s thrives when it’s doing things others can’t by virtue of its syndication arrangements. In practice this can mean specialist underwriting, innovative products, and greater efficiency.

But he won’t put a number on growth targets for the local market – or anywhere else for that matter.

“That’s not the way we think about it. We set top-line targets at our peril.

“Our non-financial target is to increase our relevance and increase the level of consideration given by clients and insurers in Australia to Lloyd’s as a desirable, necessary, and welcome solution to risk problems.

“If we are higher up the dial when those conversations, those thoughts, are happening, that’s success for us.”

Mr Tiernan singles out cyber as one area where syndicates still need to be particularly careful.

In a market that’s maturing so fast, the pitfalls are clear, and Lloyd’s has 20% of the global market.

“We’ve got a big responsibility to be on the front foot in terms of monitoring, facilitating, and maturing that market.”

Lloyd’s is playing a key role in answering questions about cyber before they’re asked. Cyber war clauses are one example of an area that could “one day be challenged”.

“In times of crisis, a lot of heads turn to Lloyd’s when they think about insurance-related matters.

“And we are seeing that at the moment in relation to the conflict in Ukraine. But as we think about cyber and we think about other classes, we cherish our reputation for innovation.”

Mr Tiernan says that reputation may have been forgotten by some over the last few years due to the emphasis on remediation.

But the work has carried on, with the Lloyd’s Lab producing some “fantastic innovation”.

However, with a reputation for innovation, comes responsibility.

“We have a responsibility to continue to look ahead, look over the hill, bring in expert voices from the industry and ensure that we are thinking about the next issues.”

A “vacuum of certainty” leaves nobody happy, Mr Tiernan says, and “closing down disparities in understanding” is a major focus for Lloyd’s, leading to better customer outcomes, and increasing trust in the industry.

“Being open about what is and what isn’t covered today is a really big step forward because it allows people to make informed decisions.”

Mr Tiernan says the total pool of cyber premium versus the total potential economic loss from major cyber events is “complete- ly out of whack”.

“But my view is that in the long term, private markets finding solutions to risk problems is the way forward.

“The better way to do this is to have these discussions before the event, and actually engage with regulators and lawmakers around the world, which is what we’re doing.”

Mr Tiernan, who worked in Australia between 2001 and 2003, has followed closely this year’s devastating flooding across the country.

And he says Lloyd’s can contribute to insurability debates by bringing its experience of similar issues from other parts of the globe.

“There’s been different approaches taken. Some more and some less successful. But I think getting the balance of insurability and affordability is a constant threat.”

He says all increased natural disaster losses can’t necessarily be attributed to cli- mate change.

“A lot of it is due to living habits in the first instance, and more people living in more concentrated areas, maybe on flood- plains, or closer to the coast.

“So, we think there’s an increase in exposures. It’s already becoming a bigger problem before we add in the likely impact of

climate change.

“Is there a risk of uninsurability? I think if everybody sits in their hands and just hopes for different weather patterns, then yes.

“I think Lloyd’s role must be in bringing the experience of other places to bear, bring- ing capital, government and insurers together to work these issues through.”

Mr Tiernan backs the industry view here in Australia that government investment in resilience is crucial.

“There have been quite a few examples where there’s been a lot of damage in a certain area, flood defences built up, similar weather patterns happen five years later and losses are massively reduced.”

He believes the Lloyd’s market’s ability to innovate is again important in keeping insurance accessible to all.

“Current conventional products for homeowners, business owners, or property might not be suitable. We may have to develop new products and evolve our thinking about it.

“To be fair to the market, I think they’ve done some fantastic work in actually looking at products that can be quite responsive.”

Mr Tiernan references New Zealand simplified earthquake insurance provider Bounce, and Australian parametric cyclone insurer Redicova, both backed by Lloyd’s, as examples.

“We’ve got to think deeply. Australia might be, because of its concentrations of population in certain areas, a more difficult nut to crack.

“But I think that the tougher the problem, the more difficult the solution – Lloyd’s should have a bigger role to play, on the ba- sis that our value proposition is to be complementary to the domestic markets and to step in where our specialisation is needed.”

In terms of dealing with climate change, Mr Tiernan says the insurance industry will play a “critical” role in the transition to net zero carbon emissions.

“It can’t happen without the insurance industry. Lloyd’s position is really very clear on this. We do not set policy, but we full-throatedly support it.

“We’re going to insure the transition be- cause that is, in Lloyd’s view, the best and possibly the only way to actually achieve the public policy goals and net-zero by 2050.”

As a corporation, Lloyd’s will be net zero by 2025, if not before.

On the asset and liability side, Lloyd’s is “absolutely committed” to net zero by 2050, but Mr Tiernan warns the graph probably won’t show a steady emissions decline.

“That’s just not realistic,” he said. “In order to get the clean energy solutions that we’re going to need for 2030 and beyond, there’s quite a lot of work that needs to be done on nuclear reactors, more wind, and more battery power for example.

“We think that it may be quite spiky or quite lumpy as we get there.

“We’re investing in terms of people, in terms of research, in terms of our own ef- forts to really drive this at the fastest, most realistic pace.”

And once again, innovation will be vital as new sectors look for the insurance cover they will need in order to operate.

“This is what the Lloyd’s market is all about. It’s about being innovative and about solving these issues.

“We are front and centre in driving that acceleration in change of how we use power.”

Lloyd’s is steeped in history, and its underwriting room where brokers and under- writers meet face-to-face to do business and share ideas is legendary.

But while traditions are celebrated, there is also a need to modernise and Lloyd’s has embarked on a mission to upgrade systems and processes and close the technological gap on some of its more nimble competitors. The Future at Lloyd’s project was launched in 2019, and the roadmap stretches into 2024.

But Mr Tiernan says it was important to spend time getting it right.

“While it was a difficult decision, it was right to take time in the design phase to ensure that there was a robust design that would survive the build phase and the adoption phase.

“We’d like to be further ahead, but we’ve no regrets in taking the time that we’ve tak- en to design this right, get the data council in place, and get the support of everybody involved in the market because this is a market solution to a market problem.”

Mr Tiernan sums up what success will look like – a data-driven market that serves its clients quietly and efficiently.

Gone will be clunky processes, old technology, tasks that don’t add value, and waste. “We want to be very easy to deal with.

We want to be competing against folks who maybe have a slight advantage over us in terms of that nimbleness or agility. We’ll close that gap down.”

He says there won’t be a “lights turned on” moment, but change is happening “quietly and confidently” and success will be “not talking about this stuff anymore”.

While covid proved that the marketplace could operate remotely, Mr Tiernan says it’s important not to see that as the new work- place model.

“My personal view is that the reason we were able to trade so successfully [through covid] and to meet customer and broker needs, is that there were years and years of personal relationships built up by various comings together in the underwriting room or elsewhere.

“As we come out of covid, one of the things that we’ve heard is ‘we’re looking for- ward to you guys getting back on the front foot in terms of creative solutions’.

“So, while I think we functioned very well, I think that the real creativity and innovation will speed up as people have those serendipitous meetings downstairs or around the room.

“A huge power of this place is its magnetism for talent, and magnetism for actual boots on the ground in London.

“The younger folks, the people who are the next generation in this market, they seem to like to be here.”

Just as important as modernising systems and processes, is changing culture. Lloyd’s is working on that too, carrying out regular staff surveys and acting swiftly where issues emerge.

Mr Tiernan says the latest survey saw “good participation”.

“I think that’s great. Maybe there’s in- creased confidence that the corporation, the market, is listening and is going to act on feedback.”

In March, managing agent Atrium Underwriters was fined a record £1.05 mil- lion by the Lloyd’s Enforcement Board over misconduct including “sanctioning and tolerating” inappropriate comments made about female employees at “boys night out” sessions.

Mr Tiernan says the incident shows “we’re not there yet”, while pointing out that the behaviour dates back to 2018 and was dealt with decisively.

“Maybe we’re never there,” he says. “Maybe you’re always trying to improve your culture, particularly your inclusivity and your magnetism for talent so everybody can come here, no matter what their back- ground or their characteristics, and go ‘I definitely want to work here, I feel included and valued here.’

“We want to make sure that more people are speaking out, anybody who’s experiencing this market in a negative way has the confidence to speak up, and we act quickly.

“If we don’t leave this place in the right state for the next generation, then shame on us.”

After almost 335 years, Lloyd’s is proud of its history. One of the reasons it’s still here, and still leading on insurance, is its ability to evolve.

And that’s more important now than ever.

Where and how to rebuild are critical questions following this year’s record-breaking floods

By Wendy Pugh

Lockyer Valley Regional Council Mayor Tanya Milligan has seen her region flooded multiple times, was involved in the landmark relocation of Grantham in 2011 and has been fortunate as rising waters have stopped short within centimetres of the front door.

The record flooding and rainfall catastrophe this year has affected a swathe of Queensland and NSW, with Lismore and other communities now dealing with questions similar to those faced by the small town of Grantham a decade ago.

“It is heartbreaking. I have been in local government since 2000 and I have certainly had my fill of floods and bushfires,” Ms Milligan tells Insurance News. “It is a really difficult space for not just communities that have experienced the loss and trauma of such an event, but you have to acknowledge too it is hard for those people who are on the ground trying to assist and to get people back on their feet. It is a hard space all

round for everybody.”

The relocation of Grantham in 2011 came after more than 100 properties were destroyed and damaged as a torrent termed an inland tsunami swept buildings from foundations. A 935-acre site on higher ground was purchased, voluntary property land-swaps organised, and the federal and state governments tipped in $18 million in a project hailed for its speed and successful delivery. Managed retreat, a controversial option in flood

mitigation, has gained prominence again as this year’s events add urgency to questions about the best way to rebuild after catastrophes and how Australia should prepare for the future.

Insurance Council of Australia (ICA) data shows flood claims have cost more than $22 billion since 1970, with this year’s record-breaking events driving more than $4.3 billion of the total. Nationally, about one mil- lion properties are estimated to be flood prone.

In Lismore, some 3045 residential, commercial and industrial buildings were directly affected by above- floor inundation when the February 28 floods hit, a city council discussion paper says. Parts of the city were under water again weeks later and wet weather has persisted.

“We simply can’t continue to repair and rebuild. The cost of these events is massive and therefore we need to do something about it,” Lismore City Council General Manager John Walker told a community meeting last month. “It’s time for a rethink about how we adapt, mitigate and live with the flood risk.”

Climate change is leading to more extreme and frequent rain events, and the city is becoming uninsurable, with consequences for residential areas, business confidence and investment, he says.

The council discussion paper has proposed a retreat from high-risk residential areas in North and South Lismore. Mitigation to protect the central business

district and investigation of a new commercial precinct are also among a suite of suggested responses.

Land-swaps could require at least $400 million in funding, Mr Walker told the meeting. The council is in contact with state and federal governments and is can- vassing views, as a new Northern Rivers Reconstruction Corporation (NRRC) swings into action.

ICA Chief Executive Andrew Hall says there’s a window of opportunity for Lismore to become a mod- el for adaptation for the whole country and decisions made now will have implications for other flood-prone regions.

“We can already see that it would just be a mistake if businesses and homes that have flooded several times now in the last 20 years were allowed to rebuild in the same location because it is just perpetuating a cycle of loss and harm,” he tells Insurance News. “I think while it is front of mind like this, it is critically important that we make different decisions to drive different outcomes.”

The experience of Grantham and the rebuilding of Christchurch after the New Zealand earthquakes provide insights into responses that can be achieved after such catastrophes, he says.

The NRRC will work with councils and communities, have the power to acquire or subdivide land and speed building and planning proposals, and will liaise with the insurance, construction and infrastructure sectors.

Mr Hall says it needs to act quickly because “decisions are being made now on rebuilds and on cash settlements and all sorts of things that are hard to reverse moving forward”.

This year’s flooding started days after ICA released an election campaign platform pushing for federal mitigation spending of $200 million a year over the next five years, matched by local and territory governments, and other resilience action.

ICA at the same time released a proposed funding program developed with actuarial consultancy Finity that pointed to risks faced by Lismore and a number of regional towns and cities.

“There’s every chance that what we are seeing in Lismore will play out in one of those other communities,” Mr Hall says. “La Nina is here at the moment and is hanging around, so we could very well have some repeat performances on our hands over the next 12 months.”

The newly elected Labor Federal Government has committed to mitigation spending, while land use planning and building standard reforms remain a work in progress. Improved national data sharing and a co-funded program to identify and mitigate legacy is- sues within existing building stock are also proposed by insurers.

Alternative solutions: Lockyer Valley Mayor Tanya Milligan says like-for-like replacement doesn’t always cut

ICA says the Federal Government should partner with states and territories and the Australian Local

Government Association to review land planning arrangements, with mitigation and disaster impacts a necessary focus at the time of approvals.

Longstanding challenges in achieving change include divided responsibilities through levels of government, while local councils, which have a crucial role, are often under-resourced.

Floodplain Management Australia (FMA) President Ian Dinham says in some scenarios local councils are left to deal with the consequences and financial bur- dens of decisions made at higher levels

“Sometimes land is released by the state government and councils then have no choice but to deal with it because developers want to develop, so councils find themselves the ham in the sandwich,” he tells Insurance News.

“If you suddenly say to people you can’t build on that block of land that you own, they go to the media or go to their lawyers and the council is then dragged into a dispute and it costs money in itself.”

FMA, which includes local governments, catchment authorities, agencies, businesses and professionals pro- motes mitigation measures, such as house raising and levees, as well as improvements in land use planning, emergency responses, and community awareness.

“We need to create safer, stronger communities, we need to build back smarter instead of just building exactly where we were and suffering the same thing again,” Mr Dinham says.

Insurers and flood professionals say planning standards based on the traditional 1-in-100-year thresh- old, are not adequately protecting communities, and cli- mate change will heighten the need to look more closely at local risks and impacts.

In the Hawkesbury-Nepean Valley, inundated again this year, there’s a vast difference between a 1 in-100-year event and the probable maximum flood – a measure that Mr Dinham says elevates “all of the factors involved in an event to come up with the worst-possible flood mother nature can throw at us”.

Critics say the 1-in-100-year terminology also gives the impression that once a flood happens it is unlikely to occur again for another 99 years. More properly described, the 1% annual exceedance probability means a 1% chance of such an event happening each year, but even that wording can be misleading.

Mr Hall told an annual forum last year that there are no simple answers to legacy planning issues, and communities face difficult conversations.

Hawkesbury-Nepean Valley debate continues over a proposal to raise the height of the Warragamba Dam wall to protect properties, as the NSW Government grapples with land development and housing pressures driven by Sydney’s western expansion.

The Lockyer Valley, described as one of the ten most fertile valleys in the world due to alluvial soils supporting horticultural and other agricultural production, also continues to grapple with the issues.

Ms Milligan says the Grantham relocation cost a to- tal of $30 million and the council still owes $6.3 million. Since then, it has developed a file of solutions to reduce risk across the region, but with a small budget it needs assistance from government agencies to put plans into effect.

“I would welcome governments, stakeholders, sit- ting down and saying ‘well what have you got ready to go, talk us through how we could better put in flood mitigation for your community’,” she says.

“If we are smart, we need to invest upfront early into flood mitigation, and assisting small communities like ours, and there are plenty of us out there, will save the government money ultimately.”

“If we are smart, we need to invest upfront early into flood mitigation, and assisting small communities like ours … will save the government money ultimately.”

Ms Milligan says there are many layers to flooding issues, including around the future use of vacated are- as, while lessons have been learned by authorities on building back to more resilient standards.

“In 2011 you just built back like-for-like, so if you lost a causeway, it was just built back as exactly what was there, which for ourselves as a council and as a community was just ludicrous,” she says. “That rang true come 2013 because some of those things that we had to build back like-for-like were washed away again.”

Risk Frontiers and the James Cook University Cyclone Testing Station say in a report for ICA that improved building design standards are important for household resilience, and more research is required into the best measures for flooding.

The typical house that experienced damage in the 2019 Townsville floods was a single storey, reinforced concrete block/ brick structure, sitting on a slab with an average floor height of 200 mm above the ground.

Once flood water reaches over the floor height, most of those properties require a complete strip out of wall linings and replacement of cabinetry and floor linings, including tiles, and claims associated with flooding are generally high, the report says.

Despite that, IAG says an Australian Building Code Board standard issued for new construction in flood- prone areas is less stringent compared with specifications for bushfire-prone areas.

“Bushfire construction requires the builder or landowner to undergo a Bushfire Attack Level (BAL) assessment, which instructs what materials can be used, what orientation and siting and what construction methodology are required to comply to the BAL assessed levels,” it says. “We believe flood prone areas should have a similar assessment or requirement incorporated into the building code.”

ICA is also pushing to amend the National Construction Code, which sits across state and territory codes, so resilience is added as a core objective,

alongside the existing focus areas of health and safety; amenity and accessibility; and sustainability.

“We have entered this debate in the last 18 months in the full knowledge that this is going to take a number of years to be able to bring forward to an out- come,” Mr Hall says. “What has happened with this rain event, particularly in the Northern Rivers, has brought home the urgency for this as an objective.”

As debate continues, the NSW Government has commissioned an independent inquiry to look at issues arising from the floods, while a NSW Parliament Select Committee is also reviewing the disaster response.

The inquiry’s terms of reference include influences from climate change and human activity, and the door is open for it to make recommendations on plan- ning and building standards, both for existing and future developments in flood prone locations.

North of the border, the Queensland Reconstruction Authority, created after the 2011 floods as the lead agency for disaster recovery and resilience, is involved in a $741 million resilient homes fund, backed by the state and federal governments, to assist people whose homes have been damaged.

Flood-affected residents within eligible areas who are interested in a voluntary buy-back, house raising or retrofitting for resilience following the floods have been invited to register their details.

ICA says there are complex issues to work through to better prepare for major flooding in future, but unless stronger homes are located in the right places, extreme events will continue to cost taxpayers millions of dollars and communities will continue to experience trauma.

“There has been traditionally some concern that when you put in resilience and you increase standards and the like, that it flows through to costs,” Mr Hall says. “But ultimately we are paying those costs anyway because homes are being badly damaged and home- owners, particularly if they don’t have insurance, can suffer really catastrophic financial consequences.”

A new initiative backed by NRMA Insurance sets out ways to build weather-resilient homes

By Bernice Han

Named after the Latin word for strong, FORTIS House is the latest insurer-backed initiative aimed at helping Australians weatherproof their homes as natural catastrophes strike more regularly,
and with more intensity.

The project is the brainchild of the Bushfire Building Council of Australia (BBCA), an independent, not-for-profit organisation working to find re- search-based solutions that will reduce climate and disaster risk for households, communities, governments and industry.

BBCA worked on the project in collaboration with NRMA Insurance and other stakeholders over several months, and unveiled it in April as New South Wales and Queensland began mopping up from the February/ March floods, the country’s costliest flood event with insured losses of at least $4.3 billion.

The idea for FORTIS House came about after the 2019/2020 Black Summer bushfires and subsequent floods, in response to affected communities seeking help on ways to rebuild homes that are better equipped to withstand future blazes and other catastrophes, says the BBCA.

BBCA is contacted by thousands of people asking for help to make their homes more resilient to bush- fire and other disasters. As the number of disasters has increased, reflecting the impact of climate change on weather patterns, says the BBCA, so have the calls to the non-profit body asking for building resilience tips. “Australia is exposed to increasing extreme weather and disasters, yet less than 10% of our houses are resilient to local risk,” Chief Executive Kate Cotter says. “We just have to do something better.”

Dwellings constructed according to FORTIS principles are designed to be “self-defending” in a disaster so

that occupants are encouraged to evacuate, stay safe and have a home to return to once it is safe to do so.

Non-combustible materials are widely used in a FORTIS home, from steel framing to cladding, decking, gutters, insulation and internal flooring, as they last longer and are low maintenance.

Features that “measurably” reduce the risk of building loss and damage from extreme weather and disasters, including flood, cyclone, bushfire and heat- wave define a typical FORTIS home.

A FORTIS House has a protective outer layer of high-performance steel mesh bi-fold screens that protects glazing and decking, which are highly vulnerable to disasters. Glazing is set back from the screens to reduce radiant heat transfer, thereby increasing the likelihood that glazing survives extreme weather and disasters. This will provide a functioning home even if the screens are damaged.

Sub-floor structures are built from non-combustible materials and screened with a mix of steel mesh and concrete blocks. The removable, perforated mesh screens allow airflow, water escape and protect services.

A FORTIS home has a roof form that is designed to be aerodynamic so that debris accumulation is minimised and uplift forces are reduced during high winds. On the sustainability front, a FORTIS house is water self-sufficient, 100% electric and solar powered. To help as many Australians as possible, BBCA has provided free FORTIS House architectural drawings, specifications and handbooks to make it easier and more affordable for them to build sustainable houses that are disaster-resilient.

Pre-fabricated FORTIS Houses are available for purchase, from $300,000 to $700,000, and can be constructed in as little as 12 weeks.

Climate and resilience experts from the NRMA Insurance team worked closely with BBCA and the Shoalhaven community in NSW to develop the FORTIS House resources. IAG-owned NRMA Insurance also provided a financial contribution to enable the development of the handbooks.

This is the second such disaster-resilient house pro- ject to involve an insurer. In April last year Suncorp launched One House, a prototype it created in collaboration with a number of partners to come up with a home structure that can withstand fire, flood, storm and cyclone.

Mark Leplastrier, IAG Executive Manager Natural Perils, says taking part in the FORTIS House project reflects the insurer’s belief in helping customers prepare for and mitigate the risks they face.

“As an insurer, we play a critical role when it comes to responding for our customers and helping communities recover in times of disaster, but preparing for severe weather impacts is just as important,” he tells Insurance News.

“To protect vulnerable communities, we need everyone who brings expertise in understanding the impacts of severe weather events to be at the same table, sharing their data and insights.

“That means greater collaboration and coordination across all levels of government, as well as local community groups, insurers, banks, councils and builders.”

Here’s a summary of features found in a FORTIS home: Sealing gaps: protects the house from ember entry,

wind driven water ingress. Reduces air leakage to improve energy efficiency

Set-back glazing and perimeter screens: protects the house from embers, reduces radiant heat, protects from debris impact caused by high winds and rushing water, and reduces wind driven water ingress. Glazing with toughened glass to appropriate Bushfire Attack Level, double glazed

Tied down roof: secures the roof during high winds that occur during bushfires, cyclones and storms

Steel framing: non-combustible, strong, water resistant

Concrete or hardwood internal flooring: non-combustible, water resilient, strong

Anchored rainwater tanks: non-combustible steel tanks, dedicated firefighting and domestic water supplies, anchored to prevent loss in storms, floods and cyclones

Elevated services: wiring in roof, elevated meter box, flood areas below probable maximum flood levels

Non-combustible cladding: steel, masonry, or concrete is fire, water and debris resistant

Sub-floor: removable, perforated mesh screens allow airflow and water escape and protect services

Insulation: non-combustible insulation

Roof ventilation: Vent-A-Roof along roof ridges on house and shed to protect against condensation and mould and allow heat escape

Heating & cooling: all electric, solar powered; reduces building penetrations and reduces operating costs

Steel half-round gutters and gutter guard: prevent debris accumulation, bushfire ignition, water ingress into roof system during storms, self-flushing and easy to clean

Decking system: non-combustible decking construction

AUB’s acquisition of a major Lloyd’s broker will transform the network in more ways than one

By John Deex

AUB Chief Executive and Managing Director Mike Emmett has talked for years about potential overseas expansion for the insurance group.

But, as has become clear, he wasn’t thinking about simply mirroring the Australian network of retail brokers in another jurisdiction – he had something quite different in mind.

The listed company announced on May 9 that it will be acquiring the UK-based Lloyd’s wholesale broker Tysers for $880 million.

Tysers is the sixth largest wholesale broker in the Lloyd’s marketplace, writing annual gross premium of $3.6 billion.

AUB was already going well, thriving through covid and earlier this year upping full-year earnings guidance after a strong performance in the December half.

But Mr Emmett explains to Insurance News that the benefits of the “transformational” Tysers acquisition will be multi-dimensional.

Of about $3.6 billion of premium expect- ed to be placed by AUB this financial year, $300 million will be placed in the Lloyd’s market.

AUB can now monetise that, through Tysers, but more importantly that figure can start to rise having been held back by a lack of complex risk capability.

“Currently, we have constraints around what we can offer clients, particularly, our medium to large clients,” Mr Emmett says.

“Apart from some pockets of our local brokers that have international experience, we almost have to defer to another broker or sometimes we will lose a client. They’ll out- grow us. And it’s normally because they’ve outgrown the local market, and we don’t have a solution to keep supporting them.

“We’ll obviously strengthen that offering and our ability to support clients irrespective of their size and scale.

“So, it’s really a way of broadening our share of the wallet for our existing customers. It gives us the capability to now accelerate some of the growth of the more complex risks. And also, being able to monetise the business that gets placed offshore.

“We see that [$300 million] growing fair- ly rapidly to about $700 million or $800 mil- lion over the next few years.”

The acquisition will also enable AUB to increase the number of products it can offer that are different, or exclusive.

“We can use Tysers’ expertise to work with syndicates in London to design products with specific niche features, and limit- ed exclusions that we can offer through our network to our clients, that other networks don’t have access to.

“Everyone’s talking about parametric solutions. People talk about a lot, but very little gets delivered.

“The ability to use conventional insurance products complemented by a parametric solution, and for us to be involved in de- signing these and then offering them to our clients, using Tysers’ ability to place that into the London market, will give us a real competitive edge, we believe.”

Then there’s the underwriting agency side of the business, which is growing rap- idly. Much of that business is supported by Lloyd’s binders, which are renewed every year through a wholesale Lloyd’s broker.

And  Mr  Emmett  sees  current market conditions pushing more and more Australian business towards Lloyd’s.

Domestic insurers are reducing risk ap- petites, he says, particularly in certain class- es of risk and geographic locations.

“In parallel, the Lloyd’s market seems to be expanding its risk appetite. And so that phenomenon means we’re going to see more and more business placement moving from onshore to offshore.”

Mr Emmett sees so many benefits to the move, that his one regret is not doing it earlier.

“With hindsight, it probably is some- thing that would have been better if we’d started pursuing it a few years ago. We’ve missed opportunities as a consequence of not having done this earlier.”

But AUB did set up a “useful precursor” in February last year. Austplacements – a dedicated unit for complex risks is led by former Millennium Underwriting Agencies Managing Director Heath Amber, who has experience as a wholesale broker in London. Mr Emmett says under Mr Amber’s leadership, Austplacements and reinsurance advisory business AustRe, along with some specialty agencies, will now combine with Tysers’ small Australian and New Zealand operation into one Tysers-branded business unit.

“This will effectively be the onshore Tysers business that our brokers will place business into, led by Heath, and that business will then be placing the business into the appropriate areas and Tysers in the UK,” he said.

“We’ll use the Tysers brand in the Australia and New Zealand market as the specialty brand. We’ll use 360 as our general commercial agency brand. And then, depending on what we do with strata, we’ll have another brand for strata.”

Asked whether he sees more overseas expansion in future, Mr Emmett says he’s not really sure the Tysers move fits into that bracket.

“It just happens to be that all the wholesale Lloyd’s brokers are in London. We’re not investing because it’s London. We’re not investing in the UK market. We’re investing in a wholesale broker.”

In fact, AUB has entered into a non-bind- ing agreement for PSC to acquire a 50% stake in Tysers’ UK retail division as part of a 50/50 joint venture between the two firms, in what Mr Emmett describes as a “risk mitigation approach”.

“We’re buying Tysers for the wholesale business. But they have a good quality retail business. We want to focus our energies and capacity on maximising the wholesale opportunities but we see upside in the retail business.

“So, we don’t want to sell it but we know that PSC has a good, well-run UK business. We like and respect them. We’ve got a good mutual relationship. And so, it’s a sensible approach – we get to retain 50% share in the upside but we’ll leverage their capacity and their capability in the UK.”

But that’s not to say that AUB won’t look at such options in future.

“I think it’s inevitable at some point, we’ll say well actually we’ve grown to the scale we believe we can be in Australia and New Zealand.

“And at that point, it’s feasible for us to say, ‘what’s the third geography that we want to be a retail broking business in?’

“Usefully, having a Lloyd’s wholesale broker aids that as well.

“For example, if you went to Canada or Singapore, it’s much easier to establish or in- vest in a retail broking network if you have the ability to support them with product and placement into Lloyd’s.

“But that’s not why we’re doing it. We really are doing it because we see it as an opportunity for us to significantly improve our Australian and New Zealand businesses.”

The network in Australia and New Zealand continues to grow and AUB, like many others, is on the hunt for acquisitions. When Mr Emmett took on the role more than three years ago, AUB had a list of 300 brokers and agencies identified as “good fits”.

And he says the list remains at about 300 today.

“Some of them have fallen off the list, and we’ve bought some. But there’s still a long list of opportunities.

“We’re very clear on which businesses we want to invest in. We follow what I describe as a long dating process. We don’t normally participate in auction-style sale processes.

“We know which businesses are out there, which ones we’d like to invest in, what we will do with them if we can invest in them.

“We try to buy businesses that want to join us and partner with us. And that’s the benefit of our owner-driver model where we can comfortably take a 50% stake.

“We don’t have to buy the whole thing.”

In early 2020, just before covid hit the country, AUB announced a plan to buy the remaining 50.1% of MGA that it doesn’t already own.

Shortly after, the deal hit the buffers as both parties made a mutual decision not to proceed due to pandemic-induced uncertainty.

“At the time, we were quite protective and cautious about cash. I didn’t know if some of our brokerages were going to run out of cash and we were going to have to prop them up. With hindsight it was a completely unnecessary, conservative action.

“We still remain a 49% shareholder, we still have great relationships, and we have achieved some of the synergy benefits of using MGA as a consolidation platform but obviously we haven’t gone forward with in- creasing the stake. If an opportunity arose in future we would love to explore that option again.”

In 2019 AUB had 93 operating entities. Mr Emmett says if you normalise, that figure would now be 105. But due to a process of consolidation and bolt-on acquisitions, it’s actually 75.

Two health and rehabilitation business- es were also sold, as Mr Emmett steered AUB away from a diversification strategy back to its core broking roots.

And he still believes in that principle.

“We can use Tysers’ expertise to work with syndicates in London to design products with specific niche features and limited exclusions, that we can offer through our network to our clients.”

“We’re insurance people. We’re insurance brokers. So broadly, our expansion in agencies and the wholesale broking piece is exactly because we’re very clear on who our customers are.

“And we really want to maximise the services we deliver to those customers related to their insurance needs.

“We want to strengthen and deepen our ability to deliver quality risk advice and insurance placements for our customers.”

While larger clients with complex risks are a focus, AUB is also paying close attention to the smaller end of the market.

In February 2020 it acquired a 40% inter- est in online distribution platform BizCover, to cover off a clear gap in its offerings.

“We didn’t have any presence in that micro-SME space, businesses with less than five employees.”

Mr Emmett says micro-SMEs are the biggest and fastest growing segment in the country, and many of them grow into larger businesses.

“We invested because we wanted a share in that market opportunity. But also because we see a natural handover or evolution. Rather than having to win SME customers against other brokers, let’s rather have them transition from BizCover to Austbrokers.”

The BizCover technology also enabled AUB to develop ExpressCover, a platform that enables brokers to service SMEs quickly and easily.

“It allows brokers sitting with their iPad or their laptop to quote, bind, and issue policies with the client in a matter of minutes.

That frees up our brokers to be able to concentrate on the advice piece, on the relation- ship piece.

“The idea is that we cater for all segments. The smallest SMEs, they’ll use BizCover, they’ll be direct. If they do choose to use a broker, it’ll be a junior broker sup- ported by ExpressCover.

“Then as they grow a bit it’s an ExpressCover enabled broker through to a full service SME broker, then if they get re- ally big we’ve got the Austbrokers Corporate team, which is a much more bespoke piece. “And now of course we’re confident that with Tysers we can support the biggest businesses and the most complex types of risk.”

AUB also has the Insurance Alliance offering, launched last year, which provides services to brokers without them having to become AUB equity partners. The Broker Co-op cluster group of eight independent brokerages is currently the only member of Insurance Alliance but Mr Emmett sees opportunity for growth.

“They have access to our ExpressCover technology platform. They have access to our Austbrokers wording. They have access to our commercial arrangements with the insurers, but at a slightly dialled back level, and then there are a few other optional extras.

“What we don’t want to do is discount or dissipate the value of what’s special about being an Austbroker. But from our point of view, the fee that [Insurance Alliance members] pay is incremental to the income. We’re defraying the costs of the services that our network paid for. So, the Austbrokers pay less.

“Our intention is that at some point we will start opening up the Insurance Alliance to larger broking groups. But at this stage, our focus is exclusively on supporting the Broker Co-op.”

For the foreseeable future, bedding down the Tysers acquisition will be a key focus.

And Mr Emmett believes, as well as offering a wealth of new options for clients, it will significantly enhance AUB’s standing in the local market.

“In terms of standing, the reality is size matters. The combined business will be $7 billion plus in terms of premium. That’s a big number.

“It upgrades the significance we have, and the types of conversations we have with certain insurers.

“As an organisation I’m really pleased with the progress we’ve made over the past three years.

“It feels like a lifetime ago that I joined. We’ve done lots of things and I’m pleased with the momentum we’ve built and the trajectory we’re on.”

Border closures and high employment have left insurers and brokers scrabbling for talent, but is there an opportunity to change the industry’s approach for the better?

By John Deex

The well of insurance talent has never exactly been overflowing, but post covid many are reporting a worrying drought.

Insurance has a continuing image problem as a career destination for graduates, and covid-induced border closures have stemmed the usual flow of overseas professionals looking to develop their skills this side of the world.

On top of that, employment is high and wage demands are spiralling. Good news for many individuals, but not for companies looking to fill vacancies or expand.

The covid experience has led many to reassess their lives – and in the US a “great resignation” has been re- ported as millions quit their jobs.

Here, experts prefer the “great reassessment”, or “great reshuffle”, but whatever you call it one thing is clear – there are huge changes taking place in the employment market and businesses ignore that at their peril.

It may not be all bad news. If workers in other industries are reassessing their lives and careers, perhaps insurance can attract some of this talent.

Companies need to change their ways to make this happen, however. An obsession with job-ready, like- for-like replacements leads to a merry-go-round where businesses are constantly poaching specialised staff from rivals.

Often the only way to do this is to offer increasing- ly higher wages – but this is not sustainable, and the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) says “lateral hiring” is key.

“It’s not the great resignation, because people still need to work,” Chief Executive Prue Willsford tells Insurance News.

“We’ve reframed it as the great reassessment, and this is our challenge. If there are a whole bunch of peo- ple reassessing their careers and their lives, how can we set the insurance sector up as a career destination as part of that consideration?

“I have always said, you tell me a skill set and I will match you to a great career in insurance. And we need diversity for the kinds of complex problems we need to solve. The breadth that we need is just enormous.”

Job-ready candidates won’t always be available in the current environment, she says, and there needs to be a willingness to invest in training and development. “I’m hearing anecdotally that there is difficulty

in getting good talent. People are wanting someone to come in and be a customer-facing broker from tomorrow.

“But I think there needs to be some investment in lateral hiring and thinking more creatively. It’s absolutely critical that we bring people into our industry laterally and bolt on the technical skills.

“It’s the only way we will successfully get the diversity we need to solve complex problems.”

Insurance-focused recruitment agency Fuse warns there’s unlikely to be any change in the talent shortage for the next 12-18 months.

“Insurance has always been a tight candidate market and covid has exacerbated that,” Head of Strategy Cameron Watson says.

“We’ve seen a huge amount of counter-offers in the last eight months – employers know how hard it is to find people so they’ve had to look at retention.”

Mr Watson says some wages have gone up as much as 25%, with low to mid-level roles particularly impact- ed. Some positions that were traditionally paid $75,000 are now attracting $90,000 or more.

But he says the situation creates an opportunity to get new talent into the market.

“There’s an increasing awareness of graduates as an alternative talent source,” he says. “The talent is out there, it’s just harder to find.”

Brokers and insurers have told Insurance News that the lack of supply is causing practical problems.

“There is a talent drought within the industry, there are more jobs than people to fill them,” Steadfast Managing Director Robert Kelly said.

“There’s a lack of immigration bringing the usual cohort out of the London market to work in Australia.

“It creates disruption, and sometimes people who aren’t up to the job are being employed just to get bums on seats.

“The staff placement agencies are having a ball at the moment, ringing people up asking if they are happy with their wages and saying they can get them more.”

Suncorp says that “like many other organisations”, it is experiencing increased “employee-initiated turnover” across certain teams.

And Allianz agrees that the industry is “not immune” to the country’s current shortage.

“The industry is finding itself in short supply of senior underwriters, actuaries, data analysts, product specialists and technical/specialised brokers,” Pierre De Villiers, Allianz Australia’s General Manager People and Learning Centre Of Excellence, said.

“This has been exacerbated by increased competition from consulting firms and numerous Fintech start- ups for talent, as well as the embedment of significant regulatory reforms creating fierce competition for skilled risk and compliance professionals.”

IAG says the pandemic has caused “widespread la- bour shortages”.

“Skilled migration has slowed since the pandemic, which has impacted our ability to find talent in some areas where there is a local shortfall, such as in the tech- nology space,” Group Executive People, Performance

and Reputation, Christine Stasi said.

“As a result our recruitment timeframes have in- creased from an average of four weeks to six weeks, as we know can-

didates often have more than one offer available to them.”

And if replacing staff is hard, that places extra incentive on retaining good talent.

Insurance Advisernet Managing Director Shaun Standfield says it’s not just about money – there are “many facets” to staff retention.

“If the culture is right and you have a team that works well together, along with an open communication environment I believe you can retain your best team members,” he said.

CBN Chief Executive Richard Crawford says insurance companies have always competed for talent, but the “smaller talent pool” is highlighting the importance of retention.

“Whilst we can see signs of a great resignation, we like to consider this a great opportunity to attract new talent that aligns with the evolving needs of the business, reconsider the ways we work and the ways we organise ourselves,” he said.

He says it’s now unusual for staff to stay at the same company for a lifetime, as they may have done in the past.

“At CBN, we are committed to bringing together a diverse group of passionate and talented team members, providing first class career, health and wellbeing outcomes during their time at CBN.”

Allianz says it is investing in wellbeing programs and technology “to improve the way people can collaborate in hybrid environments”.

Improving perceptions: ANZIIF’s Prue Willsford

Over the past year it has rolled out its new Ways

of Working scheme, aimed at “empowering employees with flexibility, autonomy and the tools for efficient collaboration in the hybrid workplace”.

“This approach is designed to enhance employee engagement, productivity and innovation, and as a result, we are already seeing an increased sense of unity and trust across our organisation,” Mr De Villiers says.

Suncorp says that many people are now seeking “employment with purpose”.

“We have found that Suncorp’s strong purpose of ‘Building Futures and Protecting What Matters’ really resonates well with candidates,” Matthew Leslie, Executive General Manager, People & Culture Strategy, says.

IAG agrees – saying people are attracted to its stated purpose of making the world a safer place.

“We have a clear strategy and vision for the future – and we are investing in our people through training and development programs,” Ms Stasi said.

“We’ve had a long-term focus on being a flexible workplace because we understand how important flexibility is for creating a truly diverse, inclusive, and agile workforce with a healthy work/life balance.”

Global broker Marsh is under no illusions about the size of the challenge.

Talent Acquisition Leader Ben Whitfield tells Insurance News the current employment market is “perhaps the tightest we have ever seen or experienced”.

Mr Whitfield says with unemployment falling be- low 4% and predicted to fall even lower this year and next, there is “significant strain” on organisations looking to attract talent.

“This, coupled with record job ad numbers, and a negative net migration trend has meant there is less talent available to fill the record job vacancies on offer.

“Candidate availability has decreased to the lowest levels in memory – put simply, there are more job ads being promoted and advertised than there are candidates to fill these positions. This creates a vacuum of available and qualified talent in the market place.”

Mr Whitfield says the insurance industry will need to manage its employees carefully, especially as the shift back to office working continues.

“How we manage and communicate such changes, and how we promote and continue to adopt an agile

and flexible workforce will likely impact any effects and resignations we see at a local level.

“This of course, will also impact our ability to at- tract and retain candidates in an already (very) tight labour market.”

Marsh itself has changed the way it approaches recruitment, being more proactive in searching out potential candidates and encouraging referrals and recommendations.

It also promotes its “culture of belonging, and opportunity to make a difference every day in the work that we do”.

“As an organisation we have a strong lens on our internal talent looking at ways we can grow, develop and to promote from within,” Mr Whitfield says.

“Over recent years we have also expanded our graduate intakes and opportunities for early careers.”

ANZIIF has also been working hard on these issues, and says progress is being made.

Its surveys show that in 2017 77% of industry respondents said there was no visibility of insurance as a career. By last year that figure had dropped to 58%.

Its Corporate Supporter Program’s Careers in Insurance initiative aims to raise awareness of insurance as a career of choice, attending the largest careers fairs to promote the industry.

Ms Willsford says a partnership with Melbourne’s Deakin University has been launched enabling corporate supporters to assign problems to a group of senior final year or masters level students.

“The students get to experience the kind of fantastic problems that they can solve within insurance and they have exposure to insurance, which we hope translates to a broader awareness.

“We expect it to be a long-term partnership, and it’s very exciting.”

Explaining clearly to young people how their insurance careers could develop is crucial, she says.

“Research indicates that, for the younger cohort, being able to see a clearly defined career pathway with the training and support and investment that goes into them as individuals, is a critical part of their selection of a quality employer.

“There is always room to improve in terms of articulating that career development pathway, because the reality is that lots of industries do it quite well.”

Economic impact: inflation is expected to feed further P&C rate hardening, says Swiss Re’s John Zhu

A return to rising inflation and interest rates will have repercussions for claims and investments, Swiss Re says

By Wendy Pugh

The war in Ukraine and the pandemic have caused such head-spinning swings in economic expec- tations that even the Reserve Bank of Australia (RBA) has been embarrassed by guidance that missed the mark.

The RBA last month raised interest rates for the first time in more than a decade, after saying when vaccines were unavailable and dire covid scenarios possible that any increase may not happen until 2024. Instead, surging inflation and positive indicators have prompted a backflip.

“Australians have been resilient, they’ve adapted and interest rates are normalising much quicker than we thought was going to be the case, so from a fore- casting perspective that’s embarrassing,” Governor Philip Lowe told a briefing.

“But what we did do in 2020 was make sure that we took every possible step that we could take to help the country in the full knowledge that if things turned out better, we’d have to reverse the policy stimulus more quickly.”

After years of inflation in the doldrums and falling interest rates reducing insurer investment earnings on premium income, the environment is changing in a hurry.

The rate hike came after the annual inflation rate hit a two-decade high of 5.1%, reflecting a shift in global economic trends examined in a Swiss Re Institute Sigma report. In the US, the consumer price index rose 8.5% in March, the most since 1981, and the Federal Reserve is also moving on rates.

“[This year] will be a challenging year for insurers with both sides of the balance sheet under pressure,” Swiss Re Group Chief Economist Jerome Haegeli says.

lining for insurers is that we are exiting the ‘low-for-longer’ and negative interest rate environment and this regime shift will benefit insurance companies over the medium and longer term. ‘Risk-free’ rates are finally not return-free anymore.”

For property and casualty (P&C) insurers, the changed scenario is a case of bad news and good news, with underwriters to see the impact of high inflation in claims and investments.

Swiss Re’s Sigma report, titled “Stagflation: the risk is back, but not 1970s style”, references a decade when economies were hit by the unexpected combination of high inflation on the one hand and weak growth on the other.

Drivers this time are shocks from the war in Ukraine and the reopening after covid, compounded by ongoing lockdowns in China. Swiss Re has adjusted inflation forecasts higher and growth lower, reflecting rising fuel and other costs and supply chain pressures.

The headwinds are blowing around the globe while differing by region, with Europe most exposed to the evolving repercussions from the Ukraine conflict.

For Australia, Swiss Re forecasts real gross domes- tic product growth will slow from 4.7% last year to 3.9% this year and then to 3% in 2023. Inflation may rise from 2.9% last year to 4.4% this year.

The Sigma report says P&C insurers are most ex- posed to an inflation shock, which will increase claims severity. Property and motor will likely be hit hardest, as construction and car part price rises outstrip those in the wider economy, while further ahead, longer tail business lines will be most exposed to sustained elevated inflation.

Swiss Re Chief Economist Asia John Zhu says floods and other natural catastrophes are an additional factor when looking at the Australian environment.

“The floods will in the short-term add to some specific and localised inflation, such as rents in affected regions. The impact on economic activity caused is likely to be temporary as growth will eventually re- bound during the subsequent reconstruction, support- ed by the current strong job market and rising wages,” he tells Insurance News.

“Claims inflation is expected to feed through into further P&C rate hardening to catch up with rising loss costs. We also see the generally higher inflation macro environment to add the upward momentum in premium rates in many commercial and personal lines.”

P&C premium growth for Australia is expected to be 3.1% in real terms this year, driven by robust demand and rate hardening in commercial lines, with property a key driver, Swiss Re says.

On the investments side, interest rates have fallen since the global financial crisis more than a decade ago, while prudential and regulatory considerations constrain the ability of insurers to seek higher yields from potentially riskier assets.

The RBA cash rate declined from 7.25% in August 2008 to a record low 0.1% in November 2020, then remained mired at that pandemic-level low until the RBA made the move to 0.35% last month. The central bank has indicated a pathway back to 2.5%, with the pace depending on events.

“Investment income should improve, but gradually as rising interest rates feed into bond portfolio returns through short-term investments and reinvestments of maturing bonds,” Mr Zhu says. “This effect is gradual

since it will take time for long-dated bond portfolios to roll over into higher yields.”

Globally, Swiss Re sees “headwinds to P&C profit- ability” this year before “tailwinds from further rate hardening and rising interest rates” next year.

The Sigma report warns that the macroeconomic outlook is” extremely uncertain” with risks skewed to the downside. Central banks must balance curbing inflation while avoiding slamming on the growth brakes and triggering a “hard-landing” recession. Even weak- er growth in an inflationary environment presents challenges.

“In a stagflation-like scenario consumers’ disposable income and savings will come under pressure and demand for insurance falls as more of household budgets are taken up by other costs of living,” Mr Zhu says.

A positive is that insurers can mitigate the risks of the economic situation through strong capital and risk management, repricing insurance risks to account for higher claims costs, reinsurance transactions, as- set reallocation in investment portfolios and hedging against inflation, Swiss Re says.

At the RBA, Dr Lowe says the rise in rates, in contrast to earlier expectations, is “basically a positive story”. Responses to get through the pandemic have worked and curbing inflation will “require a further lift in interest rates over the period ahead” as policy returns to more normal settings.

Recent experience shows nothing is certain, but insurers may have something to look forward to from an investment perspective while they first deal with difficulties caused by rising inflation and a volatile global economic environment.

“Password, according to research by IT experts, is still the most commonly used password in busi- ness across all industries.

This is a telling example of a complacent blind spot towards cyber “hygiene” that insurers are cracking down hard on, no longer willing to provide cover for firms that leave themselves so wantonly exposed to ever more frequent and severe ransomware attacks.

The past year has seen cyber attacks evolve from just encryption of data to “triple extortion”, where the attackers extract money from customers and other third parties.

Cyber insurers have imposed significant rate increases accordingly, and introduced higher self-insurance retention levels, co-insurance, coverage restrictions and language as they scramble to limit indemnity for losses arising from ransomware and systemic cyber events.

In the past, cyber underwriters were content with short renewal applications and limited checks on exposure to issue formal terms. Today, cyber insurers are more deeply investigating controls, with a laser focus on resilience to a ransomware attack.

In something of a meeting in the middle, executives must now jump through a series of hoops to extract the best cyber cover, with lengthy questionnaires and stringent requirements the new norm. Insurers are insisting on protections such as multi factor authentication, phishing training, offline backups, endpoint detection, segmentation and privileged access management before they are prepared to quote.

WTW’s local Cyber and Technology Risk Specialist Benjamin Di Marco says for a long time,  carriers “did not really ask great questions,” and just a handful of checks regarding privacy policies, response plans, data amount estimates and provider lists was “all it took for a $100 million company” to secure a cyber cover quote. 

 “The industry really hurt itself because the view was that it was a profit class and everyone wanted to do it. We weren’t actually thinking about what were the good risks and wanting minimum requirements before you are insurable. 

“It has absolutely flipped on its head, it’s a really big focus,” Mr Di Marco tells Insurance News.

Some cover providers were “skating by on the easy market – the people who hadn’t tried to understand the risk and couldn’t work through the proposal and didn’t understand what the clients were doing, and that is both on the insurance and broker side,” he said.

“Those people are screaming from the rooftops now because if you don’t know what is going on, you have no chance in the world of managing this, particularly for complex risks.”

Today, there are set controls to meet, without which most carriers will not even quote, and the “ones that will quote will give you incredibly curtailed cover to a point where the cost benefit becomes much more questionable”.

“The underwriting process is much harder, the information that we get together is much harder.”

The new, tougher underwriting attitudes are starkly reflected in the numbers: S&P Global Market Intelligence calculates a drop in the average US property and casualty direct loss (plus defence and cost containment) ratio for standalone cyber insurance to 65% last year, from 72% in 2020, though still well above the 42% average loss ratio for 2015-2019.

That was even as those insurers significantly grew cyber direct written premium to $US3.15 billion, from $US1.64 billion a year earlier, illustrating new discipline and caution when underwriting cyber.

Cyber insurance is the fastest-growing segment for US P&C insurers, where there has been a doubling of reported claims for each of the past three years, with closed claim payments up 200% annually over the same period. 

At Axa US, direct written premium in cyber jumped 44% to $US421 million last year, while at Zurich US it was up 138% to $US136.6 million, at Tokio Marine it was up 334% and Arch Capital wrote $US143.6 million after almost none a year earlier.

Ratings agency Fitch says 8100 claims were paid in 2021, and premium rates for cyber coverage skyrocketed in response to the expanded claims activity and cyber incidents, at a pace considerably higher than other commercial business lines. 

Cyber product performance is not broken out and published separately in Australia, though the Australian Prudential Regulation Authority (APRA) recently required general insurers to report on certain data regarding standalone cyber insurance policies.

Mr Di Marco says this year will remain tough but there is light at the end of the tunnel for cyber cover market conditions.

“This year is going to be bad – anyone who tells you it is going to get better this year is just lying to you – but there are enough green shoots to think things will start improving next year,” he said. 

“This is probably the new norm for rates but I think we can get a little bit better in terms of both the underwriting and the industries and the classes that are really distressed and are really difficult to get insurance for. I think they become viable.”

WTW urges businesses to focus on preparing adequately for a cyber event to occur, simulate board-level cyber exercises to “cut through decision paralysis”, reduce supply chain dependency, and take out appropriate cyber insurance cover.

Close attention will be paid by insurers to vulnerabilities concerning a work-from-home environment as high levels of claims force underwriters to reject risky business.

Mr Di Marco says the mechanics of data and operational restoration is becoming “so much more onerous” as malicious actor variants become more destructive, and and business interruption (BI) effects are better understood.

Tough times: WTW’s Benjamin Di Marco says the cyber market won’t start to improve until next year

That threat – and the more hardball underwriting attitude – is reflected in the severely hardened cyber insurance market, where cover is much harder to obtain than a year ago. The limit offer has halved to $5 million while insurers are “charging more than what they were charging for $10 million,” Mr Di Marco says.

The “low-hanging fruit” of improving cyber hygiene – effortless and simple measures with low investment and a high return – are implementing a password manager, a virtual private network (VPN) to control access to data (especially for remote workers), and securing the cloud with authorisation.

That is the advice of password manager NordPass, which found a fifth of passwords are the company name or a close variation. Its security expert Chad Hammond says it will take more than just window dressing as insurers drill down to determine whether a business is a good candidate for cyber insurance, as the average cost of a data breach hits $US4.24 million and rising.  

“Cyber insurers can act as partners in the cybersecurity journey and help you understand where your most significant vulnerabilities are and how to reduce or eliminate them,” Mr Hammond says.

Marsh, in a recent report, says the influx of cyber claims has allowed underwriters to identify a correlation between certain controls and corresponding cyber incidents, while at the same time the growth in attritional losses means insurers are now taking a much more cautious position. 

“Insurers are tightening their underwriting terms, carefully analysing all cyber insurance applications, and asking more questions than ever before about an applicant’s cyber operating environment and risk controls,” it says.

Adoption of certain controls has now become a minimum requirement of insurers, with “potential insurability on the line” for those seeking cover.

Marsh recommends 12 control steps: Multifactor authentication for remote access and privileged or administrator access; Email filtering and web security; Secured, encrypted, and tested backups; Privileged access management; Endpoint detection and response; Patch and vulnerability management; Incident response plans; Cybersecurity awareness training and phishing testing; Remote desktop protocol mitigation; Logging and monitoring; Replacement or protection of end-of-life systems; and Digital supply chain cyber risk management.

Though these have been established best practice for several years, Marsh says companies are still struggling to adopt them, with effort “often more about checking a box, than enhancing security”.

Insurers are not the only ones taking action on cyber vulnerability. APRA has undertaken pilot cyber defence testing, with specialists “actively probing” for gaps at insurers and banks, using tools and techniques employed by criminals. 

And the Federal Court recently ruled RI Advice, now part of Insignia, breached the Corporations Act with inadequate cyber security measures – the first Australian Financial Services licensee to be so prosecuted. 

The Insurance Council of Australia (ICA) has said the insurance industry can help lift cyber security practices, motivated by reduced claims and losses and possibly offering greater cover and/or lower premiums as a reward.

“There should be a ‘push factor’ from the insurance industry to raise standards and drive best practices,” it says. “The industry is well placed to drive the adoption of reputable cyber security standards or frameworks.”

ICA recommends insurers should collectively agree on a set of minimum-security requirements as part of risk assessments for SMEs.

A recent turning point, Mr Di Marco says, is a growing understanding of the time it takes for businesses to recover from a cyber attack, something he says was historically misunderstood.

 BI may last months if significant parts of a data asset inventory are compromised, and if backups are not viable, and executives face the cost of getting licences back and trying to recreate data assets which is generally much more challenging than bargained for.

“That is just a fundamentally different profile,” he said. “You can’t manage invoice, customer relationships, keep projects going. So we see the tail of the BI being much longer and much uglier and much more difficult than many organisations have historically allowed for or properly contemplated.

 “There are a number of pain points that I think are going to be happening in the next five years in this space,” he said.

The industry did well last year, after the 2019/20 Black Summer. But will the worst floods on record derail its momentum?

By Bernice Han

General insurers in Australia performed significantly better last year, more than tripling their combined insurance profit to about $3.48 billion, KPMG says in its annual state-of-the-industry review.

In 2020 the industry could only manage $915 mil- lion, the first time in the five-year period going back to 2017 when insurance profit did not crack the $1 billion mark. Earnings that year took a huge drubbing from several natural hazard events including the 2019/20 Black Summer bushfires and also initial recognition of Covid-19 business interruption provisions.

KPMG says the increase in gross written premium (GWP), by 11% to $53.85 billion, with no similar corresponding rise in claims costs was a deciding factor last year for the industry. Insurers were continuing to re- price for claims cost inflation across all lines of business, with the exception of compulsory third party, travel and employers’ liability lines.

The rate changes were most “profound” in motor and home classes for personal products as well as commercial property and professional indemnity products, according to the review.

“These rate rises are a result of insurers continuing to price products to reflect the underlying risks and costs of a policy which will drive a more sustainable product,” KPMG says.

KPMG estimates GWP last year clocked an average quarterly increase of 2.6%, representing the “highest percentage movement” it has seen in recent years.

“It demonstrates the continued hardening of the market,” KPMG says.

As the industry approaches the half-way point of 2022, predicting whether it can match or even surpass last year’s results is a difficult exercise, not least because of the floods in New South Wales and Queensland.

KPMG released the report in April, as the extent of flood damage began to emerge. While the waters have subsided, repairs are being held up by acute shortages of tradies and building materials.

The still evolving fallout from the February/March catastrophe – the country’s most costly flood event with insured losses in excess of $4.3 billion – is just one of a number of headwinds pressuring the industry. Supply chain disruption is another challenge facing the industry.

Delays to flood recovery works, on top of yet-to-be- completed construction repairs from prior catastrophes, are potentially adding to cost pressures.

“It’s not a rosy position for insurers as they head into the year,” KPMG Insurance Partner Scott Guse tells Insurance News. “It’s impossible to tell at this stage (if they can do better than last year). It will come down to the reinsurance agreements they strike and how many catastrophes that we have.”

Reinsurance renewal talks are set to finalise by June 30 and even before the February/March floods struck, reinsurers had already indicated further rate increases were on the cards for Australian clients.

Mr Guse says reinsurance rates went up in the December renewal season and also most recently in March, which was due partially to recent perils in Japan. “What is clear from the reinsurers is that they have upped the prices and they’re obviously going through a process now of discussing those increases with the insurers,” Mr Guse says. “The [NSW/Queensland] event means that you’re likely to see further increases… we’ll get a much clearer picture come June 30.”

As reinsurance rates go up for the industry, so will premiums as insurers look to defray cost pressures. “We have been through a hard cycle for probably

about five or six years now and that is a fairly long period of time in the insurance market,” Mr Guse says. “I would say all the signs are pointing for that hard market to continue. The floods are certainly one aspect that ex- tends it.”

In the KPMG review the consultancy details an array of long-running industry issues, listing climate change as among the top 10 challenges that will shape the sector in the coming years.

Others included in the list are pricing and affordability; changing customer expectations; simplification and cost optimisation; regulatory and compliance transformation; competition for talent; and digital, data, innovation and cyber security.

On climate change, KPMG says insurers continue to face a higher exposure to natural perils, such as floods, bushfires and cyclones. The effects of climate change are already being felt, with the industry increasingly concerned that the frequency and severity of natural hazard events will “significantly” push premiums up even more and render some parts of Australia “uninsurable,” the consultancy says.

Mr Guse says insurers, through peak body the Insurance Council of Australia, have been stepping up their calls on governments to do more to improve the country’s natural disaster resilience.

He sees a “positive” change in this area under the newly elected Labor Federal Government, which unveiled its Disaster Ready Fund in the run-up to the May 21 poll. Labor says its fund aims to improve disaster readiness by investing up to $200 million a year on mitigation projects such as flood levees and fire breaks, matched by states, territories and local governments.

“I think whenever you get a change in government, it’s a fresh perspective so I can see it as a positive,” Mr Guse says. “The fact that the Insurance Council was pushing the [previous] government before the election and nothing significant changed, you’re hopeful that with a new government that changes will be on the horizon.”

The KPMG review says the industry may not be able to sustain insurance in flood-prone areas and is looking to the government to implement flood mitigation measures to reduce the impact to communities when natural hazard events occur.

It warns of a “looming market failure” and potential significant risk of underinsurance for some locations and classes of assets as natural perils become “uninsurable”.

On customer expectations, KPMG says the insurance industry continues to lag behind its peers in other sec- tors when it comes to offering “best in class” experience. This is particularly the case for personal lines insurance providers.

Some personal lines insurers have made significant investment in digitising and improving the front-end sales process but improvements have been lacking in other areas, notably in claims management and policy changes.

KPMG says the process for managing claims or amending policy details is often “slow and difficult” for consumers.

“Personal lines insurers will likely need to make significant changes to their operating models if they hope to retain their customers and avoid becoming commoditised,” KPMG says.

Insurtech can help society face up to some of its biggest challenges

By Simon O’Dell, Insurtech Gateway Australia Chief Executive

nsurance is the ultimate social-good in- dustry. Through the provision of capital and services, it provides critical protections for society; underwriting our prosperity and way of life.

Never before has the insurance industry been more important. Society is facing unprecedented challenges from climate change, increased frequency and severity of natural catastrophes, an unstable geo-political environment, war and cyber crime.

Insurtech leader: Simon O’Dell

Three global social challenges

1. Protection gap – the insurance industry will typically cover less than 50% of economic loss following a natural catastrophe.
2. Vulnerable food supply chains – more than 50% of the global food supply chain is unprotected and increasingly vulnerable to a changing climate.
3. Climate change – The world is racing towards a 2 degree increase in global aver- age temperature which would be catastrophic for societies around the globe.

Insurtech represents a reliable partner to reinforce the insurance industry’s critical role in society. In the world’s time of need, we’re seeing tech working with insurance to solve society’s biggest problems. Founders from all start-up verticals are attracted to insurtech by the magnitude of the problems and the altruistic nature of the cause.

“I come from an agricultural family and have faced unpredictable weather events firsthand. After 15 years of working in the satellite industry and with the current state of technologies like remote sensing and blockchain, I saw the opportunity to trans- form agriculture insurance for the better” – Maria Mateo, Co-Founder & CEO, IBISA.

“The proxy that is the insurer’s understanding of reality is increasingly unreliable given the dynamic nature of risk. Our diverse market of Australia’s geospatial data allows insurers to ingest reality directly into their workflows. We hope this will help more of the uninsurables become insurable” – Stephen Donaldson, Founder & CEO, Geolocarta.

Three ways insurtech is working with insurance to help solve big social problems

• Parametric

IBISA brings resilience and security to global food supply chains and adds social value to farmers and their families. An estimated 2.5 billion people who manage 500 million smallholder farm households provide over 80% of the food consumed in the developing world, more than 80% of which is uninsured.

Distribution and claims assessments costs in these nations have meant that insurance is cost prohibitive.

IBISA has fixed the economics by utilising digital distribution tech for local mutuals and remote sensing data (satellites) for para- metric style claims settlements.

This results in about $15 premiums for $1000 coverage to local farmers in the Philippines, India and Africa that previously couldn’t access or afford insurance. In ad- dition to the social good and underwriting food supply chains, it’s helping to augment the insurance premium pool and close the protection gap.

• Underwriting climate action

KITA is the world’s first carbon insurer. The carbon credit market relies on the sell- ers of carbon credits to come good on the delivery of carbon reduction schemes. This sometimes does not happen.

A scheme to plant trees may fall short due to unforeseen events, or the volume of carbon captured by a forest could get com- promised by a bushfire. KITA removes the “carbon delivery risk” from buyers and sellers in the market and in turn underwrites the delivery of climate change mitigation.

• Reality-as-a-Service (RaaS)

Geolocarta provides data consumers, including (re)insurers with access to a high fidelity reality reference layer. No longer does the insurer need to rely on subjective data to profile risks or quantify potential losses.

Competitive gains in risk modelling and data analytics have been iterative for some time. This marked shift in data quality and delivery now offers (re)insurers room to compete on a differentiated basis in an otherwise homogenous market.

Reliability in risk profiling and quantifying potential losses allows insurers to in- sure (and reinsure) with greater clarity, with minimal margin required for the unknown. This should see – in the case of Australia’s increasing domestic property “red zones” – homes treated in direct consequence to the reality of their risk profile. Where a property is uninsurable, focus should shift to risk re- duction or mitigation measures.

RaaS should also help close the protection gap. In Australia alone, billions in premium are foregone due to risk profiles being too ambiguous.

• Insurtech Gateway Australia is an insurtech incubator launched in 2019 as a joint venture between the Insurtech Gateway UK parent and a consortium of local investors including Envest, an in- vestment firm focused on the insurance industry

‘She’ll be right’: Vero index bonus chapter shows SMEs exposed

More than half of SMEs say they aren’t completely covered for all business risks and a high number of those have no plan for what they would do if they experienced a major negative event, a Vero report finds.

The additional data collected as part of the SME Insurance Index survey shows that 34% of firms do not believe their business would incur losses that would cause a problem while 30% say they simply haven’t thought about it.

“Just over a quarter of SMEs who aren’t completely covered are self-insured or would be able to refinance if they were to experience a negative event,” it says. “Around 1-in-5, however, suggest they would have to cease operations.”

Broker clients are more likely to have complete cover and, if they don’t, are more likely to have a plan for facing negative events.

Businesses with declining revenue are less likely to be completely covered, which could suggest affordability might be a factor and they may be choosing to cut costs.

Survey results show even small business- es are looking to cover a diverse range of risks and more straightforward options such as business packages may not always be enough. There are gaps between risks perceived as very important and actual covers held.

Of those who say that they are concerned about loss or damage of goods in transit, 47% say they don’t have cover, while 37% of those concerned about cyber attacks don’t have insurance in that area. Gaps were also evident for business interruption and machinery and equipment breakdown.

Large businesses are more likely to have contingency plans in place, but one in four still said they haven’t thought about what would happen if they experienced a negative event.

The Attitudes to Risk report has been re- leased as a bonus chapter to the 2022 SME Insurance Index, which involved an online survey of 1500 SME and 100 large business owners and decision makers.