Talking to The Insurer TV as part of #ReinsuranceMonth, Brooks, who also serves as CEO of Ascot Underwriting, said the nature of Lloyd’s and its subscription market means that One Lime Street’s participants can “come together and look at ideas without having to put huge amounts of capital and capacity in one product”.
Brooks gave the recent examples of the pandemic-related non-damage business interruption solution ReStart, Parsyl and its global health risk facility to support Covid-19 vaccine distribution and New Zealand earthquake-focused parametric specialist Bounce as examples of how Lloyd’s has created innovative client solutions.
The Future at Lloyd’s strategy really kicked off the market’s push to become more innovative, Brooks said.
But while Brooks said Lloyd’s has done well to meet the challenge posed by emerging risks, more work is still needed.
“Look at all of these cat losses that are happening … The delta between the economic loss and the insured loss is getting wider and wider. At some point, not just Lloyd’s, but the whole market needs to innovate and think about how we come together to solve that,” he said.
One area in which Lloyd’s has collaborated with those beyond One Lime Street is the newly formed Sustainable Markets Initiative Insurance Task Force.
“It’s managed to pull together people who are actually in Lloyd’s and those such as Allianz who sit outside of Lloyd’s,” he said.
“[It] just shows you that people realise if we do come together, we’re going to be a far more powerful industry to try and solve these problems that are in the environment right now.”
When it comes to managing climate change risk though, Brooks said it would be “unfair” for the (re)insurance industry to rely solely on models.
“No one can foresee what’s going to happen with climate,” Brooks said, and gave the recent example of Hurricane Ida and the widespread flooding it caused in northeastern states after it had already generated vast losses after making landfall in Louisiana.
“We as an industry need to manage our risk better internally and risk manage better and have a risk management culture that doesn’t just rely on models,” Brooks said.
“We need to be at the forefront of going ‘okay, how can we protect it and what can we do?’.”
While the executive urged the industry to consider how it deals with rising seas and wildfire accumulations, he also predicted that the next major issue for society to contend with will be drought.
“Everyone talks about flood, but drought is even worse of a problem,” he said.
“We’ve seen what severe famines do when they happen in Africa … It’s very difficult, but we need to all come together and work together and find a way [to manage it].”
In part one of our interview with Andrew Brooks, he warns that the global reinsurance sector is failing to cover its cost of capital despite successive years of rate hardening. Click here to watch it in full.