Talking with people in the wake of the International Insurance Society's Global Insurance Forum three weeks ago, I've heard a note I haven't heard much lately: optimism.
In the face of the formidable challenges we see in the news daily, there is a sense among speakers and attendees that the industry has risen to the occasion in handling massive claims and now has an opportunity to play a leadership role on even seemingly intractable problems such as climate change.
Josh Landau, president of the IIS, told me that, "the climate side of ESG [environmental, social and governance issues] is an area where the industry can have an outsized impact in terms of what the industry is underwriting or not underwriting and where they're investing and not investing. The industry also has an opportunity to help shape behaviors that promote social equality and inclusion and equity."
Ken Mungan, chairman of Milliman, who spoke at the GIF, said bluntly: "Humanity will solve the challenge of climate change. It's just a question of how long it will take and how much pain we will have in the process." He then offered what I thought was a remarkably clever idea for how the insurance industry can do even more than it is already.
The problem he addressed is that insurers are only allowed to invest in securities with an investment-grade rating, and many of the efforts to reduce climate change and mitigate its effects don't carry such a rating. They can't. They're based on such new technology, in many cases, that many are bound to fail. But what if investments in climate-related initiatives could be pooled and then split into tranches? Equity investors and, in many cases, government funding could take the riskiest tranches, while insurers could invest in debt that, based on the pooling, could easily carry an investment grade.
Climate initiatives would still require an awful lot of funding from sources outside of insurance companies, of course, but the industry would be able to put a lot of weight behind environmental efforts while earning good, safe returns that will protect policyholders.
Thierry Leger, group chief underwriting officer at Swiss Re, said the industry can already hold its head high because of how it's handled massive claims in recent years because of the global pandemic, disruptions in supply chains, the Russian invasion of Ukraine and other geopolitical crises, etc.
"The insurance and reinsurance industry has kept its promises to help societies be more resilient," he told me as part of the video interviews I conducted following the GIF, which we'll share as soon as the edited series is available. "We have paid billions to help companies, communities, people and families to get back on track. And we're all very committed to this course."
I encourage you to check out the recordings of the sessions from the Global Insurance Forum -- they all offer meaty thinking from some of the most senior executives in the industry, and you'll surely find two or three that will grab your attention. And I certainly learned a lot hosting the interview series based on the thinking at the conference. I suspect you will, too.
Now, the industry obviously still faces many challenges. Josh said that, in particular, he expects insurers will continue to have to wrestle with inflation over the next year, along with the related labor shortages. He added that "the geopolitical issues we were talking about at the beginning of the year, as we picked the Great Reset theme for the GIF, have not only not abated but have become more volatile."
But let's stick with the theme of optimism at least for a bit. It's nice to have a break from the doom and gloom, and there will be plenty of time to focus on inflation, geopolitics and whatever else this crazy world decides to throw at us.
Cheers,
Paul