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TRANSCRIPT
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IMIA Virtual Conference 2020
What happened in the Engineering Insurance Market in the last 12 Months
Guido Benz, Swiss Re Corporate Solutions, September 2020
Image: © ChakisAtelier/iStock/Getty Images Plusagnormark / Getty Images/iStockphotoImage: João Rocha on Unsplash
2020
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Executive Summary
More wildfires,
hurricanes
and flooding
More (mega?)
construction
losses
COVID-19
impacting the
market
Image: Corbis
Trends
in energy &
infrastructure
post pandemic
Image: used under license from ImagePlus
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Image: UP Station Public Domain Image: CDC on Unsplash Image: used under license from ImagePlus
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Agenda
Image: used under license from shutterstock.com
Engineering market 1. Infrastructure project activity2. Infrastructure spending gap3. COVID-19 impact
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Nat Cat1. Climate change & Nat Cat developments2. Hurricanes / floods3. Wildfires
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Engineering Insurance Market 1. Current market status2. M&A’s3. Insurance 4.0
3
Loss Examples4
“The future has already started yesterday” – Trends 1. Energy2. Infrastructure/Construction3. Cyber Risk
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Summary & Outlook6
3
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Image: used under license from shutterstock.com
Fehmarn Belt Link, Denmark
1. Immersed road/rail tunnel, 17.6 km2. TCV USD 6.0 bio, 8.5 yrs, 30m3. World’s longest road/rail tunnel, >80 pre-
cast concrete modules from either side
The Red Sea Project, KSA
1. Luxury tourism development2. TCV USD 4.7 bio, 28’000 km2
3. 2 phases, 13 yrs, modern tech
Doggerbank Offshore Wind
1. World’s largest OWF, 3 phases2. TCV USD 4.5 bio, GW 2.4 + 1.23. 131 km resp. 196 km from shore
Mozambique LNG Project
1. 2 x 6 MTPA LNG trains inclassociated infrastructure
2. TCV USD 9.3 bio, 5 yrs3. export terminal facilities
Hampton Road Bridge – Tunnel
expansion, Virginia US
1.9 miles improvements & waterway crossing & tunnelling2. TCV USD 3.2 bio, 6.5 yrs
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Infrastructure project activity
Shandong Yulong Island, China
1. Refining & petrochem complex2. TCV USD 14.3 bio, 5 yrs3. 4’000 bpa refinery, 3 Mtpa ethylene
https://www.youtube.com/watch?v=3w-4HdA1YmM
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Total infrastructure spending gap per country 2016 – 2040,in USD trillion
World
Current trends 78.7
Investment trends 93.7
Gap 15.0
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Infrastructure spending by sector and by region, 2017 - 2035
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1. Impact of COVID-19 affecting infrastructure projects all around the globe
Projects delayed or completely come to a halt
Disruption of supply chains
Commodity prices dropped off, oil price at an all time low
Investment decisions under review affecting industry sectors to varying degree
Global economic crisis => will there be light at the end of the tunnel?
2. SONAR Report 2020:Emerging risks in the post COVID-19 era
https://www.swissre.com/institute/research/sonar/sonar2020.html
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And then a virus called COVID-19 came along …
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Agenda
Image: used under license from shutterstock.com
Engineering market 1. Infrastructure project activity2. Infrastructure spending gap3. COVID-19 impact
1
Nat Cat1. Hurricanes / Floods2. Wildfires3. Climate Change & Nat Cat developments
2
Engineering Insurance Market 1. Current market status2. M&A’s3. Insurance 4.0
3
Loss Examples4
“The future has already started yesterday” – Trends 1. Energy2. Infrastructure/Construction3. Cyber Risk
5
Summary & Outlook6
8
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Hurricanes, Floods & Wildfires
9These Photos by Unknown Authors licensed under CC BY-SA
Floods
• Mississippi River Basin Floods, USA
• Monsoon floods, China
• Monsoon floods, India
• Floods, Iran
Wildfires / Bushfires
• California wildfires
• Australian bushfires
• Amazonas rainforest fires
Hurricanes / Typhoons /Cyclones
• Typhoon Hagibis, Japan
• Typhoon Faxai, Japan
• Hurricane Dorian, US & Carib.
• Cyclone Idai, Mozambique
• Cyclone Fani, India Bangladesh
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NatCatSERVICE
Catastrophic & Nat Cat events of 2019 in a nutshell
Source: Swiss Re Institute
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NatCatSERVICE
Relevant loss events worldwide January – June 2020Geographical overview
Source: Munich Re, NatCatSERVICE, 2020
Severe storm, hailstorm
19 – 20 Jan, AustraliaOverall losses: US$ 1.5bnInsured losses: US$ 1bn
Earthquake
6 – 11 Jan, Puerto RicoOverall losses: US$ 0.8bnInsured losses: US$ 0.4bnFatalities: 1
Flood, flash flood
21 May – ongoing, ChinaOverall losses: US$ 7bnFatalities: 106
Cyclone Amphan
16 – 20 May, India, Bangladesh, Sri Lanka, ThailandOverall losses: US$ 11.5bnFatalities: 135
Earthquake
22 Mar, CroatiaOverall losses: US$ 1.1bnFatalities: 1
Winter Storm Ciara
9 – 11 Feb, EuropeOverall losses: US$ 1.8bnInsured losses: US$ 1.2bnFatalities: 11
Severe storm, tornado
10 – 14 Apr, United StatesOverall losses: US$ 3.4bnInsured losses: US$ 2.6bnFatalities: 38
Hailstorm, severe storm
13 – 14 Jun, CanadaOverall losses: US$ 1.2bnInsured losses: US$ 0.9bn
Hailstorm, tornado
6 – 9 Apr, United StatesOverall losses: US$ 2.9bnInsured losses: US$ 2.2bn
Flood, flash flood,
landslide
1 – 12 May, Rwanda, Uganda,Kenya
Overall losses: US$ 0.07bnFatalities: 281
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NatCatSERVICE
Insured vs uninsured catastrophe losses 1970 – 2019(USD billion, 2019 prices)
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In 2019, the
global protection
gap was around
USD 86 bio, up
from USD 83 bio
in 2018,but down
from the 10-year
average of USD
137 bio
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NatCatSERVICE
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Insured catastrophe losses 1970 – 2019, USD 60 bio of insured losses in 2019(USD billion, 2019 prices)
Source: Swiss Re Institute
Global insured losses were
USD 59 bio, down from USD
93 bio in 2018 and below the
annual average (USD 75 bio)
of the previous 10 years.
Of these, natural catastrophes
resulted in USD 52 bio, down
from USD 81 bio in 2018.
Man-made disasters events
triggered additional claims for
USD 8 bio, down from USD 9
bio in 2018.
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Agenda
Image: used under license from shutterstock.com
Engineering market 1. Current projects2. Energy3. Potential
1
Nat Cat1. Climate Change & Nat Cat Developments2. Hurricanes / Floods3. Wildfires
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Engineering Insurance Market 1. Current market dynamics2. M&A’s and Market Movements3. Sustainability topic on the rise
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Loss Examples4
“The future has already started yesterday” – Trends 1. Energy2. Infrastructure/Construction3. Cyber Risk
5
Summary & Outlook6
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Dynamics in the current Engineering Insurance Market
1. Capacity depletion & run-off portfolios
2. Severity losses of prior UYs adding volatility
3. Right-sizing of risk appetite and capacity deployment
4. Rate hardening & tightening of terms & conditions(refer to broker reports & trade media snippets)
5. Clear need for enhanced portfolio steering measures
6. Many re/insurers unable to deliver the expected RoE in the current state of the market state and
restricted prospects offered by financial markets
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M&A’s and market movements 2019 / 2020
16IMIA 2019
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Sustainability topic on the rise
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1. Increasingly more re/insurers exiting coal
2. Carbon footprint of companies and their portfolios becoming a topic at C-suite
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Agenda
Image: used under license from shutterstock.com
Engineering market 1. Current projects2. Energy3. Potential
1
NatCat1. Climate Change & NatCat Developments2. Hurricanes / Floods3. Wildfires
2
Engineering Insurance Market 1. Current market status2. M&A’s3. Sustainability topic on the rise
3
Loss Examples4
“The future has already started yesterday” – Trends 1. Energy2. Infrastructure/Construction3. Cyber Risk
5
Summary & Outlook6
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Notable Losses in the last 24 months
… but no ‘record-breaking’ construction losses in 2020 ytd
19Source: AON Construction and Engineering Market Review 2020
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COVID-19 – Market-wide loss estimates approaching USD 25 bio range
COVID-19 in the context of engineering covers
• Triggering clause reviews & new underwriting considerations
• Definition of material damage? Cessation of works?
• Supply chain disruption? Concurrent delays? NDBI?
20Source: Reinsurance News
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Agenda
Image: used under license from shutterstock.com
Engineering market 1. Current projects2. Energy3. Potential
1
Nat Cat1. Climate Change & Nat Cat Developments2. Hurricanes / Floods3. Wildfires
2
Engineering Insurance Market 1. Current market status2. M&A’s3. Insurance 4.0
3
Loss Examples4
“The future has already started yesterday” – Trends 1. Energy Transition2. Infrastructure/Construction3. Cyber Risk
5
Summary & Outlook6
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Energy Transition – Renewable Energy Outlook
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• Global renewable energy is expected to grow strongly by 2030 with projected annual investments of USD 630 bio
• 70% of new power generation capacity added between 2012 and 2030 will be from renewable technologies with solarPV and wind being the major growth drivers, whilst coal, gas and oil will be declining and hydro remaining stable
• In the post COVID-19 era with anticipated government stimulus packages and the theme ‘building back better’ thesustainability topic will likely gain further momentum
Source: Bloomberg New Energy Finance
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Post Covid-19 Engineering Prospects
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Investment in constructech start-ups & their main area of focus
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Cyber Crime – not if but when… with an uptick during the pandemic
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Agenda
Image: used under license from shutterstock.com
Engineering market 1. Current projects2. Energy3. Potential
1
Nat Cat1. Climate Change & Nat Cat Developments2. Hurricanes / Floods3. Wildfires
2
Engineering Insurance Market 1. Current market status2. M&A’s3. Insurance 4.0
3
Loss Examples4
“The future has already started yesterday” – Trends 1. Energy2. Infrastructure/Construction3. Cyber Risk
5
Summary & Outlook6
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Summary & Outlook
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• Impact of the pandemic fostering a turning point in the insurance market that is already in
motion
• Times of change => ‘back to the roots of UW’?
• Portfolio steering considerations taking centre stage
• Sustainability topic gaining further momentum
• Recovery of economy ‘building back better’ as a significant opportunity for engineering
re/insurers
• Adapting to the ‘new normal’
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The End & Question Time
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