August/September 2021 - Insurance News (Magazine)

AMBITION ACHIEVED Richard Enthoven’s Hollard hits the M&A jackpot CLAIMS PAIN A materials shortage is hurting insurers

BRAIN DRAIN Securing top talent is harder than ever

BE AN ALLY FOR CHANGE

The industry’s annual diversity festival is back

August/September 2021

Hello Yellow Mobile plant and equipment are welcome at Zurich.

Customers can simplify their insurance by including plant and equipment along with all other vehicles under the one world-class, motor policy.

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Zurich Insurance This information is general advice only and does not take into account your objectives, financial situations or needs. You should obtain and consider the relevant Product Disclosure Statement and Policy Wording (as applicable) from zurich.com.au before making a decision. The issuer of general insurance products is Zurich Australian Insurance Limited (ZAIL), ABN 13 000 296 640, AFS Licence Number 232507 of 118 Mount Street, North Sydney NSW 2060.24171 V1 103/21 TFMC-016590-2021

Contents 6 Newsmakers 10 Shortages hit home

Housing grants, natural catastrophes and the coronavirus have combined to create challenges for insurance building and repair work

14 Hollard hits the jackpot

The insurer’s game-changing CommInsure acquisition is set to take it to new heights

20 Tough times persisting

The June 30 renewals period shows premiums are continuing to rise and some pain points are becoming more acute

25 Where have all the experts gone?

…and where will the new experts come from? A skills crisis across the industry is sparking calls for a talent renewal strategy

30 Conserving the culture

PSC Insurance Group continues to grow at a rapid rate, but not at the expense of core company values

35 Dive In wants you!

Lloyd’s annual diversity and inclusion festival summons those who work in insurance to be allies for change

40 Parametric possibilities

Could cover based around agreed sums and risk levels be a simpler option for catastrophe-prone northern Australia, and beyond?

42 The Howden way

44 Aftershocks

Swiss Re’s annual Sonar report on emerging global risks looks beyond the darkest days of the pandemic

48 ‘Nobody wants ASIC on their doorstep’

Brokerages adding ARs to their ranks must keep a watchful eye on increasing compliance obligations

50 Expanding possibilities

Resilium’s new chief explains why the authorised representative network can look to an exciting future as part of Ardonagh

52 Vero keeps customers afloat

The insurer is providing grants to help SMEs get through the COVID storm

companyNEWS 54 Hybrid home

QBE takes up residence in new office

54 Positioned for growth

CBN sets direction with team changes

peopleNEWS 57 ‘A great day in great weather’ 58 maglog

Meet Matt Bacon, who is tasked with leading the UK-based global broker’s charge into the Australian broking market

AMBITION ACHIEVED Richard Enthoven’s Hollard hits the M&A jackpot CLAIMS PAIN A materials shortage is hurting insurers

BRAIN DRAIN Securing top talent is harder than ever

BE AN ALLY FOR CHANGE

The industry’s annual diversity festival is back

Pictured: Richard Enthoven Credit: Kym Thomson

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August/September 2021

AON/WTW MERGER FALLS APART The mega-merger that would have created the biggest insurance brokerage in the world has been abandoned, with Aon paying Willis Towers Watson (WTW) a $US1 billion termination fee.

The companies revealed the merger proposal in March last year but have “agreed to terminate” the business combination agreement after being unable to resolve US regulator concerns.

“Despite regulatory momentum around the world, including the recent approval of our combination by the European Commission, we reached

an impasse with the US Department of Justice,” Aon CEO Greg Case said.

“The DOJ position overlooks that our complementary businesses operate across broad, competitive areas of the economy.”

WTW CEO John Haley says the business is well-positioned to “compete vigorously” around the world.

“We appreciate and deeply respect all the Aon colleagues we got to know through this process,” he said.

The organisations will move forward 0 independently.

is still more investment capital “There looking for a home than there is grey matter itself. ”

Willis Towers Watson on record breaking insurtech investment, with some insurtechs rushing towards public listings before they are ready.

ZURICH’S PLANT LEAVES FOR IAG Zurich Australia General Insurance CEO Tim Plant is leaving the business to join IAG in the new position of Chief Insurance and Strategy Officer before the end of the year.

IAG says Mr Plant will be accountable for group governance across underwriting, claims and customer experience, together with developing and driving the implementation of IAG’s strategy. The role will also be responsible for IAG’s innovation and ventures activities.

Zurich says it has appointed Justin Delaney as Country CEO, with responsibility for the insurer’s General Insurance (GI) and Life and

Investments businesses in Australia and New Zealand, following Mr Plant’s decision to leave.

Mr Delaney was most recently CEO Life and Investments, taking up the role when he joined Zurich in December 2019.

Zurich Chief Underwriting Officer of GI Australia & New Zealand Sean Walker will support Mr Delaney in the management of the GI business, the insurer says.

Mr Plant started with Zurich in August 2018. Previously he was the Group Executive of Insurance for NSW at icare, and he held senior 0 roles at QBE between 2009 and 2016.

AFCA SPEEDS UP COMPLAINTS ‘LACKING MERIT’ The Australian Financial Complaints Authority (AFCA) has spent three months trialling a new procedure of more quickly declining some complaints that lack merit, where it found compelling reasons.

About 120 cases were identified for review under the pilot and 106 were closed after AFCA determined the complainant had not suffered loss or the financial firm had not made an error.

AFCA’s 40,000 members were informed of the trial, which the dispute resolution body now hopes to make a permanent feature of its system.

“We are taking action. We are taking it seriously,” COO Justin Untersteiner told a virtual AFCA member forum that attracted about 700 attendees.

The pilot came after brokers called for a “more robust” triage system to address potential gaming of the system and prevent firms paying disproportionately high costs in some low-value matters.

A National Insurance Brokers Association submission from April said that, as intermediaries, firms can bear costs relating to issues arising from actions taken by insurers, even when there is no real basis for the complaints against the broker.

AFCA says the new process better scrutinises certain complaints at the very early stages of its process. After contacting the consumers and members on these cases, there were only a small number that objected to its assessment.

The time taken to complete these cases halved and the average fee was $890, compared with fees closed at the determination stage of up to $4000.

“We are currently in the process of finalising our review of this pilot and we hope to make this change a permanent feature of our system. We do believe it will go a long way to addressing the feedback you have given us,” Mr Untersteiner told AFCA 0 members.

Ripped apart: houses destroyed by July floods in Mayschoss, Germany. Credit: Reuters

GERMANY PUTS FLOOD LOSSES AT €5 BILLION The first estimate of some of the damage from the deadly rain and floods in Germany in July puts insured losses near €5 billion.

The German Insurance Association (GDV) says that initial preliminary estimate covers the flood disaster in North Rhine-Westphalia and Rhineland-Palatinate.

Damage in Saxony and Bavaria is not yet included.

Nationwide, nearly all residential buildings are covered for windstorm and hail, but only 46% of homeowners have protection against other natural hazards such as heavy rain and floods.

This year is still likely to be the most damaging year since 2002 when insured storm damage was €10.9 billion, GDV says, due to storms, flooding, heavy rain and hail across June and July.

Clean-up work in the disaster areas is still underway and destroyed infrastructure makes communication and inspection difficult.

June rains and hail had already caused

an estimated insured loss of €1.7 billion and since July 12, countries in Europe have been struck by catastrophic floods, killing at least 180.

Belgium and Germany – as well as Austria, Luxembourg, the Netherlands, Switzerland and Italy – were all severely affected.

Ratings agency AM Best says German insurers’ disciplined pricing means carriers should be well-positioned to absorb heightened weather-related losses, despite potential record natural catastrophe claims in 2021.

The losses are expected to reignite debate in Germany about the creation of a state-backed natural catastrophe scheme versus making elemental insurance cover compulsory.

Unlike many other European countries, Germany has no scheme in place and flood risk is excluded from standard policies.

While flood cover may be added as an extension, insurers can be reluctant to accept risks, mainly due to a lack of widespread 0 reinsurance cover, AM Best says.

HIGH COURT REJECTS TEST CASE APPEAL The High Court has denied the Insurance Council of Australia’s (ICA) application to appeal a judgment in the first test case on business interruption claim denials.

The NSW Court of Appeal last year ruled insurers couldn’t rely on exclusion wordings citing the Quarantine Act and subsequent amendments to deny claims for COVID-19 related disruptions.

Legal representatives for insurers presented arguments to the High Court of Australia outlining why an appeal of that decision should

be considered, but they were rejected.

ICA says it acknowledges the High Court’s decision.

“While we are disappointed, this decision on the first test case provides us with certainty and allows the industry to focus on the issues to be resolved through the second test case underway in the Federal Court of Australia,” ICA CEO Andrew Hall said.

ICA says insurers will respond to affected customers who have lodged business interruption claims on a case-by case basis, but the

vast majority of claims will not be able to be finalised until further clarity is provided by the second test case.

That case will determine the meaning of policy wordings in relation to the definition of a disease, proximity of an outbreak to a business, and prevention of access to premises due to a government mandate, as well as policies that contain a hybrid of these type of wordings.

The second case is expected to begin on August 30, with any appeal likely to 0 be considered in November.

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NIBA NAMES NEW CEO

The National Insurance Brokers Association (NIBA) says Philip Kewin, pictured, will become the group’s CEO following the retirement of Dallas Booth later this year.

Mr Kewin joins NIBA after a long career in financial services, most recently as CEO of the Association of Financial Advisers, a role he has held for the past four years.

Prior to his four years’ service at the AFA, Mr Kewin was responsible for the Adviser Life

From the

PUBLISHER

Risk and Investment business at Zurich Australia, including five years as GM of Life and Investments. He has also had his own financial planning business.

“Philip has a long track record of successful leadership in a number of key positions in financial services,” NIBA President Dianne Phelan said.

“His extensive experience, high levels of integrity and authenticity, are what we believe make him very well qualified for the role at NIBA.” Mr Kewin will join NIBA on August 16 in a transition period ahead of Mr Booth’s retirement on October 31.

“The NIBA board acknowledges the significant contribution outgoing CEO Dallas Booth has made for the benefit of all members,” Ms 0 Phelan said.

NEGATIVE DIPOLE POINTS TO MORE RAIN The Bureau of Meteorology has confirmed that a negative Indian Ocean Dipole (IOD) is underway, increasing the likelihood of above average winter-spring rainfall for much of southern and eastern Australia.

“Most climate models surveyed by the bureau predict a negative IOD pattern is likely to persist until at least mid-spring,” the latest climate driver update says.

The IOD Index, which reflects differences in sea surface temperatures between the eastern and western tropical Indian Ocean, has been below the IOD threshold for eight of the past nine weeks, reaching the point at which an event is declared.

In the Pacific Ocean, three of seven models surveyed by the bureau indicate cooling temperatures will be enough to reach La Nina thresholds in the spring, with the remaining four models staying neutral.

“This forecast cooling may also be contributing to the outlook for above median rainfall for much of Australia in the coming months,” the bureau says.

The climate driver update could indicate an increased risk of heavy rain, flooding and thunderstorms, while there could also be a reduced risk of early season bushfires for eastern and south-east mainland 0 Australia.

The popular image of insurance as a slow-moving and impenetrable monolith isn’t reflected in the dynamic amount of change happening at all levels of the Australian industry.

At the top end we have the emergence of one-time wannabe Hollard Insurance as a major player, thanks to its acquisition of Commonwealth Bank’s general insurance business. The deal sees Hollard grow its gross written premium by an extraordinary 50%, placing it just below the likes of Allianz Australia and QBE as Australia’s fifth-largest general insurer.

Hollard’s founder Richard Enthoven is the subject of our cover story in this edition of Insurance News magazine. He is among the younger echelon of managers who are leading insurance into a future of technology, professionalism and opportunity, and his views on the deal and what it represents make for valuable reading.

The Commonwealth deal is the latest in the banks’ move away from owning insurance operations. After growing substantial life and general insurance businesses on the back of their huge customer databases, the banks have come to accept that the volatility and complexity of insurance – and the discomfort they experienced at the hands of the Hayne royal commission – don’t fit their culture.

In broking, we’ve seen the first brakes applied to the wave of top-end mergers, with the US Justice Department deciding the merger of Aon and Willis Towers Watson is an uncompetitive step too far. The unravelling of what had been seen as a complex but unstoppable deal will take a while – a situation that will spur competition.

Locally the broker mergers and acquisitions drive continues unabated. Expect to see more action throughout the next year as foreign brokers compete for prime businesses with the established consolidators. That’s good news for veterans considering a future move into retirement, and also for ambitious young brokers seeking the financial and logistical backing to build.

While this issue of Insurance News contains plenty of articles that reflect an industry experiencing substantial change, there are also – of course – plenty of weaknesses and threats that balance the industry’s strengths and opportunities. But as we struggle against the vagaries of a pandemic that won’t go away, it’s worth taking a little time to understand how the insurance industry is balancing uncertainty with the promise of an absorbing future.

Terry McMullan

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Shortages hit home Housing grants, natural catastrophes and the coronavirus have combined to create challenges for insurance building and repair work

By Wendy Pugh

A

fter towering eucalypts toppled over during storms that hit Victoria’s Dandenong Ranges in June it was pointed out there was a lot of value in the fallen timber.

As part of the clean-up, state-owned VicForests is looking to buy logs that meet specifications and there’s likely to be strong demand for any resulting processed building products.

Timber is among materials affected by shortages caused by a confluence of natural catastrophes, the COVID-19 pandemic and government actions to power the economy through difficult times.

The building supply side is struggling to keep up with demand across the country, material costs are increasing, and the insurance sector and its customers are navigating the difficulties.

“There’s no doubt that material shortages are posing challenges for the industry at the moment,” Suncorp Head of Home Claims, Queensland Joel Manning tells Insurance News.

“The supply chain has been disrupted by COVID, and economic factors closer to home are compounding the challenge of slower imports. With international travel off the table, record low interest rates and government incentives such as HomeBuilder, Australians’ appetite for renovations and new homes is driving huge demand for materials.”

The Federal Government’s HomeBuilder stimulus, offering grants for new homes or substantial renovations, has attracted strong take-up and, combined with the low interest rates and state-based programs, has spurred a housing activity surge.

The program received more than 121,000 applications – four times original expectations – with $25,000

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grants offered from June last year before scaling back to $15,000.

The eligibility deadline for starting construction was in April, extended from six to 18 months after building industry groups warned tight timeframes mightn’t be met due to material backlogs and skilled labour shortages.

The Housing Industry Association (HIA) describes HomeBuilder as the largest direct injection of government money into the owner-occupier housing market in Australia’s history, while forestry and wood products data analysis firm IndustryEdge says it has contributed to a boom without precedent.

IndustryEdge Managing Director Tim Woods says housing is highly responsive to stimulus measures and has become the modern “go to” in times of economic trouble, but the current scenario has resulted in hyper-stimulation.

“Demand is just off the wall and it has grown at the fastest-ever rate, so no supply chain can keep up; it’s just impossible,” Mr Woods tells Insurance News. “Economic interventions are always a balancing act and sometimes we overtip the balance.”

While the demand stimulus has addressed economic stresses caused by the pandemic, the coronavirus has also complicated supply issues, with outbreaks and restrictions hindering the movement of materials locally and internationally and further contributing to shortages of tradespeople.

The HIA Trades Availability Index shifted marginally from -0.55 to -0.53 in the June quarter, as the industry experiences one of the most significant skills shortfalls of the past 20 years.

“This small improvement reflects quarterly

In demand: a building boom has left insurers facing a shortage of materials

volatility, not a material improvement in the supply of trades,” HIA Economist Angela Lillicrap says. “The shortage is occurring to varying extents across all regions and all trades measured in the report.”

For insurers, the rise in new home construction comes as active demand for building and repair work continues following claims triggered by a string of catastrophes from the Black Summer bushfires to recent weather disasters.

“Some of the most significant difficulties we’re facing include a shortage in metal roofing materials due to the Rockhampton and Springfield hailstorms in 2020, timber shortages and delays on custom items, particularly for older homes,” RACQ Group Executive Tracy Green tells Insurance News.

“Timber shortages are due to general demand, and also a number of large international mills shutting down. We have seen increased wait times for supply, and builders in southeast Queensland having to bring trusses in from other parts of the state.”

Similar delays exist for custom fabrication items, including window awnings, roller doors of atypical size, as well as custom-size water tanks and sheds. Items that aren’t mass-produced are often required for older homes.

“These shortages, combined with high demand for tradespeople, is having an impact on claim-handling times,” Ms Green says. “We’re working hard to minimise impacts to our members, but some have been unavoidable. Claims costs have also been impacted.”

Insurance Council of Australia (ICA) figures show $500 million in losses from the Rockhampton and Yeppoon region hailstorms in September, while Queensland’s Halloween storms that brought giant hail

caused $998 million in damage.

Over the past three years insurers have paid out more than $7.4 billion in natural disaster claims, with more than $5.6 billion paid out since the 2019 bushfires.

Catastrophes this year have included the Perth Hills bushfires, Cyclone Seroja, the NSW and Queensland flooding that hit the Hawkesbury area and the Mid North Coast in March and the Victorian June storms that caused wind damage in the ranges and flooding in Gippsland.

Allianz Australia National Manager, Claims Technical and Business Operations Mark O’Connor says the Black Summer bushfires generated claims and affected plantation timber, while the availability of tradespeople who could normally travel across regions has been hindered by the active disaster period and COVID issues.

“What you are seeing is a significant number of catastrophe events occurring across the country in an unusually short period of time,” he says. “There is tons of work, but we don’t have enough workers. Then there’s the resourcing piece, and the government stimulus has added another layer.”

The building surge has centred on free-standing homes, predominantly wood-framed, in contrast to previous apartment-led booms. Apart from timber, sourced locally and imported, other materials that have experienced delays include bricks, while a tile shortage has mostly been resolved.

The HIA told a NSW Parliamentary inquiry into the sustainability of the timber and forest products industry in May that timber framing supply times had increased from three weeks to about 8-10 weeks.

Timeframes for new home completions are now

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“Prior to these current restrictions a shortage of trades and goods and state border closures, on top of a number of natural disasters, had been impacting insurance repairs and remediation times for customers.”

sometimes blowing out by months. The impacts vary according to particular trade and material shortages in different locations, while smaller repairs may cause fewer problems.

IAG Executive General Manager, Supply Chain Garry Baddock says the unprecedented demand for materials has created a challenge for the construction industry and the insurer is monitoring the situation closely.

“The majority of the building products we need to repair our customers’ properties are Australian-made, sourced locally and in good supply,” he says. “However, we continue to work with our builders and trade suppliers to forecast demand and manage any potential impacts.”

Import delays reflect freight issues, slower-than-normal customs processes, country of origin production problems and international competition for supplies, with Australia not alone in using home building as an economic stimulus.

North America in particular has been competing for imported timber, including engineered wood products. Timber pricing there has increased by about 400%, adding more than $US23,000 to the cost of a new home, diverting supply away from Australia and placing pressure on the global market, HIA says.

Allianz’s Mr O’Connor says forward thinking and planning is required in the current environment, while communication with policyholders is vital where works may take longer than expected.

Impacts when fire or severe weather has destroyed a home may include longer periods living in temporary accommodation, provided as part of a policy’s cover.

“From a customer perspective they are still protected, albeit inconvenienced as they are not back in their own home,” Mr O’Connor says. “From an insurer’s perspective there is that increased cost that might then be incurred because we weren’t able to get those customers back into their home as quickly, and like all claims costs that has a flow-on effect.”

As for the availability of tradespeople, ICA says it has been working with state governments and building industry associations to ease constraints.

That has included looking to increase the availability of trades required to repair and rebuild properties of natural disaster-impacted policyholders, and working to allow interstate workers to travel where needed

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amid border closures.

Seeking clarity around border restrictions and increasing the feasibility of bringing in qualified trades from overseas have also been part of the discussions.

Complications continue to be thrown up by ongoing coronavirus outbreaks and lockdowns, with the more infectious Delta variant leading to further rounds of restrictions and border closures.

New South Wales and South Australia halted non-critical building repairs as part of measures to limit spread of the virus last month. ICA emphasised in response that the industry is doing what it can to continue important work on claims, but the lockdowns are likely to exacerbate shortages.

“Prior to these current restrictions a shortage of trades and goods and state border closures, on top of a number of natural disasters, had been impacting insurance repairs and remediation times for customers,” ICA Chief Executive Andrew Hall said in a statement.

“Insurers ask for patience and understanding from the community as they work to repair property and vehicles.”

Suncorp highlights the value of having scale and long-standing relationships with builders and other suppliers across a national network in the current circumstances.

Trades and materials pressures may continue for some time, given the housing pipeline and with COVID-19 outbreaks still sweeping around the world and testing the mettle of governments.

Mr Woods says building products supply is not “a magic pudding” and the current situation in Australia fuelled by stimulus programs represents “the law of unintended consequences writ large”.

Monthly housing approvals have set records, there’s the likelihood of two consecutive quarters with the largest-ever commencements and the biggest ever overhang of uncompleted work, and IndustryEdge says it will be at least another 12 months before all the homes in the pipeline are built.

HIA says the trades skills shortage, measured by its index, is expected to ease next year as the number of new homes commencing construction slows.

In the meantime, insurers will have the uncertainty of possible impacts from any future natural 0 catastrophes.

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Hollard hits the jackpot The insurer’s game-changing CommInsure acquisition is set to take it to new heights

By John Deex

S

peculation over which of Australia’s heavyweight insurers would land the much sought-after prize of Commonwealth Bank’s (CBA’s) general insurance operations was rife for weeks before the successful company was announced.

Not surprisingly IAG and Allianz were rumoured to be front-runners as the process neared its conclusion.

But the eventual winner was a company few had seen as a likely option.

Hollard emerged victorious on June 21, announcing a deal that involves an upfront payment of $625 million and includes a 15-year partnership for the distribution of home and motor vehicle products to CBA retail customers in Australia.

Not so long ago Hollard was considered a challenger brand, so it’s not hard to see why founder Richard Enthoven and his new Chief Executive Paul Fahey could barely contain their delight when the deal was announced.

The acquisition brings Hollard an extra $800 million in gross written premium (GWP) – increasing its GWP by 50% – and a lot more besides.

Mr Enthoven, who has stepped away from the chief executive role to become Managing Director of holding company Hollard Holdings Australia, says the acquisition aligns perfectly with ambitions the company has held from day one.

While the CBA deal is undoubtedly a far bigger fish than he could have originally expected to land, he can look back on a range of achievements since he moved to Australia in 1999 to set up the local operations of the South African-headquartered Hollard.

“We felt there was an opportunity for a partnership-based insurer in the market,” he tells Insurance News. “We knew that it would take a lot of time to deliver that.

“But as it turned out the opportunity was probably bigger than we had anticipated. And I think it’s safe to say that we have exceeded our expectations by some margin.”

He says Hollard’s strategy “is about working with significant organisations to distribute highly valued insurance products to their customer bases”.

“And if that’s your strategy, a partnership with CBA

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would be your number one strategic objective.

“So we are super-excited about the 15-year strategic alliance with CBA. It really allows us to double down on our strategy of focusing on our key customers.”

This strategy includes partnerships with giant retailer Woolworths, financial services specialist Greenstone, and leading broker groups Steadfast and Austbrokers among others.

“For a partnership-based insurer, [the CBA business] is the biggest prize in the country,” Mr Enthoven tells Insurance News.

The acquisition should close in a year’s time, by which time Hollard expects to be “just shy” of $3 billion GWP. Mr Enthoven says that will make Hollard clearly the fifth-largest insurer in Australia, and probably the fourth-largest in personal lines.

“So our ambition of becoming really meaningful in the Australian market, I think we have achieved.”

But the acquisition delivers longer-term opportunities, too.

Mr Fahey tells Insurance News he has his eye on what the acquired business can bring to Hollard, not just next year but over the next 15 years.

Mr Fahey spent seven years running CBA’s general insurance operations before joining Hollard in 2016, so he’s perfectly placed to know where the extra opportunities in this deal lie.

He says that over the course of the past few months working with the CBA team, he and Mr Enthoven “have both come to the realisation that there is still a lot of unrealised opportunity, given the access to Australians that [CBA] has”.

“It takes us to far more meaningful scale than where we are today. But actually, that’s not the endgame. That is another five to 10 years down the road.”

The CBA products will still be CBA-branded, but Hollard will underwrite them and provide support to improve aspects including claims experience and product innovation.

And while CBA currently only supplies home and motor insurance, the Hollard team is already turning to what could come next.

“All of us are looking at the fact that there are other

Australian ambition: Richard Enthoven set out to build a ‘partnership-based’ insurer

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“We think we’re buying the best asset that will be available for an acquisition in the insurance industry in a long time.” product opportunities,” Mr Fahey says.

“There are others that the CBA distribution channels are absolutely a perfect fit for, and they don’t offer those products today.”

He also sees opportunity in bringing home loans and home insurance closer together. “Most players today approach them as two very distinct products and two very distinct onboarding experiences. But looking at that whole CBA relationship, we go, ‘well, what can we actually leverage from that home lending?’

“What [the bank] knows about that customer leads us to consider how we can use that to build out a better home buying experience.

“We think no-one really has transformed home insurance in respect of how it’s sold through banks today. CBA has delivered the best outcomes, but still, even from their own perspective, there is considerable growth potential in that business.”

Mr Enthoven believes Hollard’s experience with its other key partners, including major corporates such as Woolworths, will stand it in good stead when it comes to integrating and developing the CBA business.

“We think that really sets us up well to work closely with CBA to deliver on their insurance ambitions,” he says.

“For us, this is not the first time that we’ve worked with a major Australian corporate with a large customer base and rich data analytics. We have a lot of experience in this space and we’re really excited to bring that experience to bear.”

Having secured the CBA deal, Hollard isn’t actively looking for major new partners anytime soon.

Its focus for now is on integrating the CBA business and team, and maximising opportunities within its other existing partners, all of which have good momentum.

It’s also in the middle of a major new technology platform project.

“If you look at what we’re standing behind now – CBA, Woolworths and other major partners – they’re very iconic Australian brands,” Mr Fahey says. “We still think there’s significant growth potential in all of them.

“Never say never, but I don’t expect you’ll see us out there onboarding any significant new partners

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in the near future.”

Mr Enthoven points out that all Hollard’s partnerships are growing.

“Woolworths Insurance continues to grow. Ando in New Zealand continues to grow. Greenstone continues to grow. So we have enough growth in our pipeline not to have to worry about or focus on growth.

“What we are really focused on is simplifying our business, delivering on the IT transformation projects that are well advanced now, and preparing for a successful onboarding of the CBA business.”

While the CBA acquisition has been a huge boost to Hollard, Mr Enthoven says the past few years have been extremely tough for the insurance industry. COVID-19, coming on top of a spate of natural disasters, has ramped up the pressure. But the pandemic has provided some valuable learnings, too.

“I think we’ve learned among other things the value of diversification,” Mr Enthoven says.

“COVID has obviously really hurt parts of our business, like travel insurance. The ability to fall back, in times like this, on other parts of our business that may not have been so impacted has been really valuable.

“The other lesson about COVID is that as an industry we probably need to improve our risk management, and accept that these sorts of black swan events do happen. Probably we underestimated as an industry the sort of collective risk of these types of things occurring.”

While Hollard is a relatively small player in the commercial market, it has been impacted by the COVID-19 business interruption wordings issue.

“That has been frustrating, and I think the industry and consumers are frustrated by the time it’s taking to resolve this issue.”

But despite the frustrations that have flowed from this he says the industry has been “very proactive” in setting up test cases so individual customers don’t have to go through expensive and exhaustive legal processes.

“I feel the industry has done a good job, but the wheels of justice turn slowly.”

Mr Fahey says the pandemic has also been a reminder for insurers to get closer to their customers.

Expectations can change incredibly quickly, he says,

Time to think: Mr Enthoven has switched to a more strategic role

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whether in relation to motor insurance discounts when lockdowns prevented movement, or travel insurance coverage as the pandemic unfolded.

“I think there’s a real lesson that insurers can do more to be even closer to their customers. I think COVID was a big a wake-up call.”

The insurance affordability debate continues to roll on, as a hardening market makes it difficult for customers in some areas or sectors to access the cover they need.

But Mr Enthoven is keen to emphasise that excessive insurer profits aren’t causing the problem – far from it.

“The insurance industry has had its worst few years on record in Australia,” he says. “We’re starting from a situation where even on current terms and conditions, insurers aren’t generating a sufficient return on capital to encourage investment in the industry.

“That has to get addressed. Otherwise, the availability of insurance will evaporate.

“And to the extent that we see more frequent natural catastrophe losses, that has to be reflected in premiums for the insurance industry to stay viable.

“And so, I do think the price of insurance will continue to reflect the risk to underlying policyholders.”

Costs to the insurance industry are also rising, he says.

“We have input pressure on the supply chain. We have input pressure on reinsurance. And to some extent, we have input pressure on staff costs, particularly in certain skillsets. The cost to provide the service is

definitely going up.”

While he sees the Federal Government’s proposed reinsurance pool for northern Australia as a positive, Mr Enthoven says there’s still much to do in projects that prevent the levels of damage that typically accompany cyclones.

“We have seen that when federal and state governments invest in risk mitigation, insurance becomes more affordable. That is demonstrable. So there is a really good return on that spend for the community.”

As for climate change, Mr Enthoven believes the industry must use its expertise to inform the debate and encourage good community outcomes.

“Climate change is not an insurance industry issue,” he says. “It’s not even an Australian issue. It’s a global issue.

“But to the extent that our industry has unique insights into the problem and the social cost of the problem, I think we should continue to share those insights and be a voice in the business community for a robust strategy of managing and mitigating the risk where we can.”

Australia’s insurance industry still faces a myriad of challenges, but Hollard remains upbeat about the year ahead and beyond thanks to an ambition achieved, expectations exceeded, and a new position as one of the leading general insurance companies in Australia.

“We think we’re buying the best asset that will be available for an acquisition in the insurance industry in a long time,” Mr Enthoven says. “We don’t think there’s 0 another one like it coming up.”

Playing to strengths Recent top-level role changes at Hollard are designed to enable the most effective delivery of its next phase of development.

Former personal lines head Mr Fahey is now Chief Executive, while Mr Enthoven has taken up a more strategic position as Managing Director of Hollard Holdings Australia.

Born in South Africa, Mr Enthoven spent significant time in the UK and US, but it’s Australia he’s chosen as the place to build his life and career. That was never the plan when he arrived in 1999, but he’s delighted with how it’s turned out.

“I arrived in Australia as a 28-year-old and I’m now 50.

So I’ve pretty much spent the meat of my career in Australia.

“I think diversity of thought is a huge asset, so I feel privileged that I’ve had exposure to other countries and lived in other places that have given me perspectives that are valuable. But at the end of the day, my commercial story is an Australian and New Zealand story.”

He’s hoping the new role will give him “more time to think”.

“Running an insurance company the size of Hollard is a very busy day-to-day life, with not a lot of time to reflect,”

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he tells Insurance News.

“What I want to do now is spend a bit more time thinking about what are the big things that make a difference for our customers, our people and our partners, and apply myself to figuring out how Hollard best delivers on those.”

He has full confidence in Mr Fahey, who takes charge of all Hollard sectors apart from pet insurance, which continues to be run by Alexandra Thomas.

Mr Fahey has always worked in insurance, primarily personal lines, spending his early years at GIO before a lengthy stint at CBA, where he ran the general insurance business for seven years.

Mr Enthoven says his successor is “thorough and disciplined” and will lead by example.

“I am very confident that for the body of work that Hollard needs to deliver on over the next few years, [Paul’s] skillset is the best to do that.

“It’s really making sure that collectively, the Hollard leadership team skills are deployed in areas where they can add the most value.”

Tough times persisting The June 30 renewals period shows premiums are continuing to rise and some pain points are becoming more acute

By Wendy Pugh

C

ommercial policyholders seeking relief from the rising premiums and difficulties that have sparked various official inquiries and reviews will have to wait a while yet, judging from the mid-year renewals.

Compared to a year ago, property is a mixed bag, liability classes are increasingly difficult and cyber has emerged as one of the most challenging areas, with rates rising strongly and underwriters cautious.

“The market has continued to harden, there are fewer insurers with capacity in the market, and those that remain have tightened their appetite,” Resilium General Manager of Broking Angela O’Neil tells Insurance News.

“Policies are more difficult to place and premiums have risen.”

The industry overall is feeling the impacts of ongoing catastrophes following the heavy losses of the Black Summer season. COVID-19 also continues to exert a strong influence and some areas of cover have become more problematic as insurers seek to improve performance.

The Insurance Council of Australia (ICA) told a parliamentary inquiry that the industry is enduring its most challenging circumstances in nearly two decades, with the entire sector only making a profit of $19 million in the March quarter, based on Australian Prudential Regulation Authority data.

Investment returns are offering little help. Interest rates remain at record low levels as the Reserve Bank of Australia looks to support an economy that in the past year has dipped into recession, bounced back and now faces renewed lockdown setbacks.

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Willis Towers Watson Head of Broking Australasia Trent Williams says combined operating ratios show insurers are losing money, and they are focusing on achieving the technical rate required to bring performances up to desired levels.

“They are not making money off their investment return at the moment, so they need to make money off underwriting profitability,” he says. “Being disciplined is the number one step to ensure you have a sound foundation in doing that.”

Nevertheless, there have been signs of greater willingness to negotiate in some areas, depending on the situation for particular risks. Examples include cases where clients have already experienced significant increases in recent years.

“There’s the ability to push back on some of the conditions and some of the rate increase – not to the level that it was pre-2014, but there is the ability to trade and work through to a landing now as opposed to just accepting what the insurers are putting up,” Mr Williams says. “That is the difference I am seeing as this year starts to unfold.”

At the same time, COVID-related restrictions are reducing opportunities for face-to-face negotiations with brokers, with Teams and similar technologies providing a potentially easier channel for underwriters delivering difficult decisions.

Insurance Advisernet’s Outlook for this financial year has put the market at 10pm on the Insurance Clock, indicating rates are in the rising-strongly stage of a hard market.

Managing Director Shaun Standfield says compared

to a year ago market capacity and the ability to place risk seems to have stabilised, with less of the wild swings seen amid the initial experience of carriers adjusting to COVID performance and management of their portfolios.

“Last June we were coming off the back of one of the country’s worst catastrophe seasons as well,” he tells Insurance News. “That has been relatively subdued.

However, we still see rate coming through various insurer products to return their profitability to pre-2019 levels.”

Pressure is also coming from hardening reinsurance rates and tighter terms, while remediation across unprofitable areas is taking place with a strong focus on the risks as wider economic settings remain a headwind.

“There has been a broad return to a technical underwriting basis given investment returns have been historically low and don’t look like returning to previous levels for some time,” Mr Standfield says.

A rare area of premium easing exists in motor pricing, which has stabilised and even fallen in some areas, with the lack of vehicles on the roads due to COVID restrictions an influence on the market. Flat to 10-15% reductions have generally been seen, but elswhere Mr Standfield sees premium pricing remaining on an upwards trajectory.

Insurance Advisernet believes the outlook depends on the frequency and severity of future catastrophes, but cautions that without corrective action the industry will not be able to sustain continual year-on-year catastrophic events while still providing

cover for “usual” loss events.

The group sees average premium increases remaining in a 10-15% range, with figures influenced by a client’s industry sector, geographic location, prior claims experience and approach to risk management.

MGA Managing Director Paul George says some areas of property appear to have stabilised but brokers are seeing a lot of inconsistency in the market’s approach to a number of occupations and hazards. In some cases, risks that were previously difficult have become less so, although that’s not common.

Overall there seems to be little change from 12 months ago, Mr George says, with cyber, professional indemnity and management liability appearing to be the latest areas that are tightening.

“It’s difficult to know how long these pressures will continue,” he says. “I think everyone would be wondering if the market has got to the point it needs to get to.

Perhaps some market areas will start to relax while others might even tighten further.”

Brokers are attempting to manage the process and client expectations by starting review processes early to gain a preliminary feel for the state of play, given uncertainty over insurers’ appetite for particular renewals.

In the current environment it’s not only pricing that’s an issue, but also capacity, with some insurers unexpectedly stepping back from what may previously have been considered straightforward “vanilla” risks.

Mr Williams says looking at reinsurance buying strategies also helps provide indicators on where insurers are heading, given the influence from that sector on premium levels and policy terms and conditions.

insuranceNEWS

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21

“The market is continuing to harden and shrink. With the unknown COVID impact and recent catastrophes, I would not like to hazard a guess at how long this will continue.”

– Resilium’s Angela O’Neil

The latest Marsh Global Insurance Market Index report finds that in the Australian-dominated Pacific region pricing increases overall are continuing, but with a moderation in property.

Rates rose 23.2% in the June quarter, according to the index. This compares to a 29.4% increase in the March period and 34.6% in the preceding three months.

Property pricing rose 14% compared to 20% in the March quarter, but casualty’s 18% increase was the largest year-on-year gain since 2012. A stronger emphasis on policy wording reviews was also evident.

In the financial and professional lines, directors’ and officers’ has levelled out as more excess layer capacity entered the market. Professional indemnity premiums increased and capacity tightened, while cyber rates increased significantly, with desired levels of cover harder to find.

Brokers say repercussions from increases in malware, ransomware and social engineering attacks are being felt internationally, and Australia is no exception.

“There are major challenges in the market for cyber insurance, and the percentage increases that insurers are looking for on cyber are really quite significant now,” Head of Global Placement for Asia and Pacific John Donnelly says. “That’s a global trend.”

Casualty and financial line market pressures were a consistent theme in the renewals period, although rate increases and the availability of capacity varied sharply.

“If the current insurer offers renewal, increases can be as low as 10%,” Resilium’s Ms O’Neil says. “However, we are finding that more often renewal isn’t being offered, and an increase of 50%-plus is expected when moving to another insurer.”

Willis Towers Watson highlights in a recent report that primary construction liability rates have increased 30-60% while design and construct professional indemnity annual gains have been around 50-100%.

Non-conforming cladding and structural defects are a key focus, particularly for clients in the high-rise

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residential sector. Renewable energy and waste to energy are particularly challenging areas, with many insurers not willing to provide cover.

“We do not expect any easing of market conditions any time soon,” the WTW report says. “The outlook for the second half of 2021 is more of the same.”

In construction liability insurers have focused on worker-to-worker claims, relating to contractor injuries, amid wider upward trends in injury claims experience.

Liability relating to bushfires is another red-flag area, Mr Williams says, and insurers remediating portfolios mean programs such as sexual abuse cover are particularly difficult at the moment, creating issues for the education and faith sectors.

The market issues have increasingly seen insurance pressures spill over into the political arena as businesses express frustration and seek answers, with ICA also undertaking its own investigations.

ICA Chief Executive Andrew Hall told a parliamentary committee examining coal industry problems that it’s almost like every individual sector of the economy has an underlying risk issue that’s affecting insurance availability or pricing at the moment.

“In the world of commercial insurance there is not, as we say, a silver bullet that can fix this,” he said. “We need to work through very carefully some of these underlying availability and affordability issues, which are driven largely by professional indemnity and public liability issues.”

The mid-year renewals point to difficult conditions persisting for some time yet in a number of areas, with past upward drivers still exerting an influence while emerging issues are coming into play.

“The market is continuing to harden and shrink,” Ms O’Neil says. “With the unknown COVID impact and recent catastrophes, I would not like to hazard a guess at how long this will continue.

0 “All we know is that we are not through it yet.”

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Where have all the experts gone? …and where will the new experts come from?

A skills crisis across the industry is sparking calls for a talent renewal strategy

By Bernice Han

T

he past few months have been extremely busy for Sydney-based national loss adjuster Technical Assessing.

Not only did the company recently open an office in Canberra, it also made a number of new hires to support its fast-growing business across the country.

Recruitment of specialists for the insurance industry is often a difficult and complex process, and Managing Director David Cambridge says the problem is growing – there simply aren’t enough people available to take technically challenging jobs.

“There is a talent war going on right now,” Mr Cambridge tells Insurance News.

“I think it’s going to get worse before it gets better, because this takes a long time to fix.”

Industry insiders and headhunting firms in Australia say they have never seen anything quite like it. It isn’t just loss adjusters that are hard to find; underwriters, brokers, claims managers, actuaries and other specialist insurance professionals are also in short supply.

Vacancies in critical back-end supporting positions such as broker assistants and claims support consultants are proving equally difficult to fill as well – a sign of just how tight the insurance labour pool is at the moment.

To address the current labour crunch, insurance firms have had to think out of the box to attract and retain talent, coming up with innovative tactics to secure the staff they need.

Technical Assessing, for example, has moved its bonus scheme to a quarterly basis from annually. It has also in recent years operated a cadet program where a junior adjuster who may be completing their tertiary qualifications can gain experience and be mentored by senior and executive adjusters.

If anything has come to define the economic side-effects of the pandemic, it is shortages. The world is running low in just about everything from computer memory chips, cars, building materials, and consumer goods to skilled manpower.

The Morrison Government’s strict COVID border closure policy has virtually choked the supply of high-calibre experienced specialist candidates from traditional sources such as the UK, the US and South Africa.

But recruitment experts say the broader labour squeeze affecting the industry at present has been years in the making.

Human resources agency Hays warned five years ago that the insurance industry was facing a shortage of skilled executives and would have trouble filling vacancies.

Hays says in its latest salary guide that the industry will remain an “active job market” over the next 12 months, with high demand for professionals with specialist knowledge. Cyber underwriters and cyber claims consultants are in greatest demand at present, with insurers finding it hard to fill vacancies because cyber is still a reasonably new product.

The widely shared consensus is that years of under-investment in talent scouting and development, particularly at the university level, have finally caught up with the industry. And it is now paying the price for not giving as much attention as it should have to tertiary students who have so many career options to choose from.

It’s a “perfect storm” hitting the industry at the worst

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August/September 2021

25

“Insurance has an ongoing skills shortage because not too many children grow up wanting to become a catastrophe modeller or an insurance broker.”

possible time when Australian borders remain shut to overseas arrivals, closing the availability of foreign specialists. And it’s likely to remain a problem long after the pandemic is over.

Simon Weaver, Willis Towers Watson Head of Australasia and Head of Corporate Risk & Broking Australasia, says the border closures have reduced the talent pool to some degree but points out that “it’s always been difficult to recruit skilled insurance candidates”.

He agrees there are shortages in some niche lines of insurance in particular.

There simply aren’t enough people with knowledge and experience of those niche products to match the rate of growth in client demand.

“Beyond what we’re dealing with today, insurance has an ongoing skills shortage because not too many children grow up wanting to become a catastrophe modeller or an insurance broker,” Mr Weaver says.

“Many people simply ‘fall into’ working in insurance. But the reality is once they join the industry, they love it and they see the extraordinary career that is possible.

“If we could find a way of getting children excited about working in insurance, skills shortages would dramatically reduce.”

Australasian Institute of Chartered Loss Adjusters President Glyn Lloyd says the skills shortage facing the profession is “very acute”. He pinpoints a number of factors that have combined to cause the current squeeze.

It isn’t just the impact of the lack of 457 visas for loss adjusters coming in from overseas.

Mr Lloyd, who is part of the management team heading up liability at global adjuster Charles Taylor Adjusting, says it takes a unique set of skills to become an adjuster. “[Loss adjusting] is a role that is not always seen as a natural progression for those in the insurance

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industry, and due to the increase in work demands it has been a difficult process for loss adjusting companies to both attract young talent and adequately train those individuals,” he tells Insurance News.

Besides having suitable qualifications and technical knowledge, adjusters need “soft skills” such as diplomacy, empathy, technical knowledge and excellent negotiation skills.

He says some adjusting companies may have failed to provide suitable soft skills training for their adjusters – possibly because they’ve been too busy doing the job to focus on such training.

“Increased pressure from client demands plays a part in the lack of investment in training in developing new loss adjusters due to the increased frequency of catastrophes,” he says.

He says the resource pool of experienced loss adjusters is often very stretched, and their primary focus is dealing with claims to all stakeholders’ satisfaction, as well as complying with new regulations set out in the General Insurance Code of Practice.

A spokesman for IAG says

COVID-19 has presented challenges to many Australian businesses in the form of state and national border closures. The spokesman says one of these impacts is emerging skills and labour shortages due to a lack of skilled international migrants.

“We continue to use emerging technologies to increase engagement and productivity, such as ‘virtual assessing’, to attract the best talent in the market and to support us in responding to changing customer and environmental needs,” the spokesman tells Insurance News.

Technical Assessing’s Mr Cambridge says it is time for the industry to take a longterm approach to building its talent pool, and he is not alone in thinking this way.

For far too long, the industry has relied on talent renewal by virtue of people “simply falling” into the profession instead of joining because it was in their career plan.

“If people are saying ‘they fell into it’, it shows we’re not being strategic as an industry in how we recruit,” Mr Cambridge says.

“The industry is not often considered by aspiring young professionals, largely because it’s not as well known as say, the banking and accounting sectors. There is no

“If the industry doesn’t take responsibility for training young actuaries and expects accomplished actuaries to just come out of nowhere, that won’t happen.” well-defined pathway into the profession.

“Responsibility to address this rests with the industry.”

Paul Murphy, the Managing Director of insurance specialist employment agency Ensure Recruitment, says the larger insurance firms do a good job at training fresh talent and offering them opportunities to rise up the ranks.

He says businesses with fewer resources have been less willing to compromise on the skills and/or the experience level they are looking for, and this is leading to extended hiring times and positions being vacant for longer periods.

Meanwhile, businesses that are willing to invest in people development and support them in moving into more senior or technical roles are attracting new talent.

Offering better salaries and other non-financial perks are no longer the only requisites in today’s employment market, Mr Murphy says.

“Employers have to be really confident that their hiring leaders are able to really sell the organisation and make sure that they’re articulating what the organisation can do for the candidate and their career.

“Yes, salary will be part of that for sure, but candidates have become very good at seeing through generic statements that

28 insuranceNEWS

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are made by an employer – things like ‘we offer great career progression’. They want to see real-life examples of that.”

He says employees now want permanent flexible work arrangements as well as a rewarding and absorbing job.

“The biggest thing to develop since COVID has been flexibility,” Mr Murphy says. “Pre-COVID it was seen as a bit of a benefit, but now it is a norm. Organisations that aren’t offering flexibility are simply not going to have access to the best talent in the market.”

Specialist actuarial recruitment firm SKL Actuarial sees long-term extensive training mechanisms as key to the industry meeting demand for actuaries.

Managing Director Jas Singh says the profession is highly specialised, requiring plenty of on-the-job training to build up experience.

“It’s not a plug-in profession where you just get in all these applicants from abroad and fill in the supply,” Mr Singh tells Insurance News.

“If the industry doesn’t take responsibility for training young actuaries and expects accomplished actuaries to just come out of nowhere, that won’t happen.”

He says actuaries look for a lot of things besides financial incentives such as cultural fit, career prospect, rapport

with potential boss and social values of prospective employers.

“It’s a whole raft of factors that go into it as opposed to just the money,” Mr Singh says.

He says the international border closure has impacted the recruitment of overseas actuaries but points out that it’s not “the heart of the problem”.

“It was never the magic solution,” he says of the recruitment of actuaries from other markets such as the UK. Recruitment firms say that in a market as tight as this, insurance firms relying on standard advertisements to fill key roles will most probably come up short in their search.

“It’s no longer enough to just say ‘we’re looking for a financial lines broker with these skills’,” Mr Murphy says.

“We’re saying to our clients, ‘you have to create your own value proposition to convince and entice a potential applicant to join you’.”

Mr Cambridge of Technical Assessing says the “brain drain” affecting the industry top-down is not going to go away.

“We need to be telling graduates insurance is actually a great career option,” he says. “Otherwise the industry will see itself with an even greater talent leakage 0 in coming years.”

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New focus: PSC’s Rohan Stewart is driving positive culture across the diversified business

Conserving the culture PSC Insurance Group continues to grow at a rapid rate, but not at the expense of core company values

By John Deex

P

SC’s journey began in 2006 with the acquisition of a Melbourne brokerage with five employees and $800,000 of revenue.

Some 15 years later the diverse insurance group is heading for $220 million in annual revenue, with operations not just in Australia but also New Zealand, the UK and Hong Kong.

It’s broking roots remain strong, with traditional branch offices and a thriving authorised representative (AR) network, but PSC has also branched out into workers’ compensation, claims solutions and life – and boasts a range of specialist underwriting agencies.

The appetite for growth has not diminished, with the group aiming to double in size and capability over the next four years.

Group Chief Executive Rohan Stewart, who joined the business in 2009, tells Insurance News that while continual growth is the target, it has to be done in the right way – controlled, considered, and with a healthy culture at its heart.

Putting the client first is part of PSC’s DNA he says, as is looking after front-line staff and not micro-managing.

“I think we’ve always set healthy stretch targets for our business,” he tells Insurance News. “We always want our business to grow year-on-year, we want to grow revenue, grow profit – we have always had that as a minimum expectation.

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“We have this continuing desire to keep acquiring and organically growing by building a broking proposition that’s geared around the client first and then building all the infrastructure around it to support it from there.”

PSC isn’t a “serial acquirer”, he says, and many potential targets have been knocked back because the culture didn’t fit.

“Importantly for us the culture’s got to be right and the people have got to be aligned similar to us – client first, acknowledging that the people that look after our clients are our most important group of people.”

Mr Stewart says looking after all employees is “the PSC way”, and that management egos are kept well in check “Treating people poorly in our business, or someone feeling they’re better than anyone else, is almost the cardinal sin,” he says. “We jump on that very quickly. It doesn’t matter what your role is, everyone supports each other and no one can really get their job done without contributions from others.”

Mr Stewart believes the company’s commitment to culture has helped it outperform the market and its competitors.

And a recent adjustment to his role means he is now able to give the issue more of his personal attention.

Former Allianz executive David Hosking has joined the group as Chief Executive Australia and New Zealand, allowing Mr Stewart to step back from some of the day-to-day concerns.

“We want to make sure we don’t lose the things that we think differentiate us – people running their own businesses, being treated fairly,” he says. “We want to make sure the cultural aspects get out to all parts of the business, whether it be Hong Kong, or the UK. “Bringing David in here means I will spend more time driving the culture through the organisation.

“I’ll spread across both international and local, but it’ll be more around getting involved in acquisitions, how do we work more closely with Steadfast, how do we drive the culture.

“As your company gets bigger you don’t want to lose the things that have stood you in good stead from the start.”

Mr Stewart says the targeted growth over the next four years will come from “wherever the opportunity presents itself”.

Insurers contracting in the hard market creates agency opportunities, but equally there are plenty of

openings on the broker side.

PSC caters for may broking models, including traditional brokerage branches, joint ventures (JVs), and ARs. “We’ve got 16 branches that are full of brokers, salaried employees,” he says. “We’ve then across Australia and New Zealand got nearly 200 ARs, and then we have our JV partners.

“What we’ve got is a range of brokers who, depending on where they’re at, can either run their own business and lease out our facilities and our licence, be 50/50 JV partners where we are providing capital and helping them grow their business, or they can be salaried employees.”

A fruitful partnership with Steadfast (PSC is the network’s largest member) is an attraction to potential partners, as is the ability to obtain shares in the business which listed in 2015.

“There are plenty of broking opportunities out there because it’s an aging population, there’s regulatory reform coming over the hill and there’s a point where brokers will say ‘I don’t want to worry about that any more’,” Mr Stewart says.

“We are looking at quite a few opportunities at the moment. Some of it is because [the brokers] are at an age where the owner wants to step back.”

But as PSC grows it is careful not to become too centralised.

“We don’t create big buildings full of people,” Mr Stewart says. “That was one of the learnings [founding partners] Brian Austin, Paul Dywer and John Dwyer got from their OAMPS days.

“You don’t buy businesses and just put them all together and hope it works. Bringing different cultures, different egos together can work, but it can be problematic.

“So we don’t let any business get bigger than 30 or 40 people. We don’t want people managing people managing people.

“We want the people running that business to be close to their staff and close to their clients.”

The AR network is also targeting growth, but Mr Stewart says the AR selection process is rigorous.

“We like to see our ARs as part of our acquisition trail down the track. We’d like to eventually be able to acquire all of our ARs if we could.

“We have a view that unless you’d be prepared to employ them in your business you shouldn’t put them on as an AR. “We’ve got about 55 ‘member brokers’ in New

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“The key thing we tell people is we take the business seriously, but we don’t take ourselves too seriously.” – Rohan Stewart

Zealand. Over time we’d like to be acquisition partners for those as well.”

Growth is also likely in the rapidly expanding UK operation and fledgling Hong Kong presence.

“We recently bought three businesses in Hong Kong that provide broking and risk management services, so that’s a bit of a toe in the water to see what we can do in that region. The UK business probably does as much premium throughput as the Australia and New Zealand operation,” Mr Stewart says.

“We’ve got wholesaling businesses in London which are effectively Lloyd’s brokers. If retail brokers want to get into Lloyd’s they come in through us.

“We’ve also recently started to buy some retail brokers in the UK. Outside of London they look after SMEs and slightly larger commercial clients – very similar to what we do here.”

He says a network of regional brokers in the UK is a good opportunity for PSC. “We’re now fairly heavily weighted to the UK, we’ve got quite a dependent revenue stream coming out of the US, we’re dabbling in Hong Kong, and we’re continuing to grow business in

New Zealand and Australia, so the geographic spread is quite significant.

“That gives advantages because you are not beholden to one geographic area and it also gives a more diversified revenue stream.”

Wherever growth comes from, the group has already come a long way from five staff and $800,000 in revenue.

The bigger you get, the harder it is to continue to grow, but Mr Stewart is confident PSC’s targets can be achieved – and that the culture it has grown up with won’t be lost along the way.

“We are going to try and bring in capability to help us continue to grow, so it might be individuals, it could be teams, it could be niche specialist areas.

“The key thing we tell people is we take the business seriously, but we don’t take ourselves too seriously.

“We’re always having a bit of a joke and a banter, but equally we know exactly where our numbers are, how we’re performing.

“I think they’re important elements of being able 0 to run a business holistically.”

Coping with COVID While the pandemic has had an impact on some areas of PSC’s business, Mr Stewart says overall it “hasn’t missed a beat”.

Flipping to remote working came easy, and results have continued to impress.

Lockdowns have also opened the company’s eyes to the benefits of flexible working.

“We always preferred people to be in the office working so they could be interactive and sharing ideas.

“But I think you can find a bit more of a balance with some people in some roles where they could do three and two, or four and one in terms of the split. We didn’t see any productivity drop-off which I initially thought there could be.”

The real challenge with COVID has been in dealing with insurers, Mr Stewart says. That’s the result of a hard market and an inability to hold face-to-face meetings

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with underwriters.

“Getting risk placed at the moment is probably 30-50% more difficult than it was 18 months ago.

“Insurers’ risk appetite has contracted and it just gets harder because it’s more difficult to walk down the road to see an insurer and get a deal done.

“Pre-COVID there was a spate of bushfires, floods and storms, so the hard market was already kicking in at that point. COVID has added to it.”

This makes a broker’s job harder, Mr Stewart says, but also potentially more valuable.

“There is a lot more work to get the same risk placed.

In some of those harder-to-place complex risk areas it’s not so much about the price it’s about getting capacity, getting someone to put the risk down.

“My point to our people is that good brokers shine in hard markets. We can demonstrate our worth.”

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Dive In wants you!

Lloyd’s annual diversity and inclusion festival summons those who work in insurance to be allies for change

By Miranda Maxwell

T

he US Army’s “I want you” recruiting poster, with its image of Uncle Sam sternly pointing, is an unforgettable call to action. In the same spirit, the organisers of the 2021 Dive In festival are summoning those who work in insurance to “be an ally for change”.

That’s the theme for this year’s festival promoting diversity and inclusion in the insurance industry. Dive In will be held on September 21-23 in a hybrid virtual/physical events format.

Last year it attracted a record 30,000plus attendees from 35 countries – almost three times that of previous years.

“We still have so many more people within the industry, and beyond, that we need to reach,” Dive In Steering Committee member and Head of Inclusion & Diversity at Willis Towers Watson (WTW) Jen Denby says.

This will be the Lloyd’s-backed Dive In Festival’s seventh consecutive year, and organisers say it is time for attendees to consciously help others be successful under the “active allyship” theme.

Global Festival Director and Head of Culture at Lloyd’s, Pauline Miller, says this year’s events will focus squarely on “making real change” and “turning good intentions into equitable outcomes”.

The theme has been welcomed by a range of companies in the local insurance industry. Willis Towers Watson (WTW), for example, is responding with a festival session on “helping to create a positive impact for Aboriginal and Torres Strait Islander peoples”.

It is partnering with the From the Heart campaign, which seeks a First Nations voice to Parliament to be enshrined in the Constitution, as outlined in the Uluru Statement from the Heart.

That one-page, unfussy statement’s agenda culminates in a call for “makarrata” – a word from the language of the Yolngu people in Arnhem Land meaning “coming together after a struggle”.

The WTW Dive In session will be presented by WTW’s Western Australia General Manager Corporate Risk & Broking Adam Rhodes, who recently stewarded the global broker’s commitment to its first Reconciliation Action Plan (RAP), a framework which more than 1100 organisations have now committed to.

Mr Rhodes describes himself on LinkedIn as “passionate about diversity and inclusion, especially with our First Nations peoples” – a passion inspired by a chance meeting with former rugby league footballer David Liddiard at an industry event.

Mr Liddiard champions a “be what you see” philosophy, Mr Rhodes tells Insurance News.

“He had this expression, ‘blackfellas in suits’. He thought that was the answer — young Aboriginals can see their relatives leading these successful corporate lives we all take for granted.”

Mr Rhodes is also an independent member of the Arnhem Land-based Ganybu Aboriginal Housing Corporation, and the Yinhawangka Decision Making Committee which represents the native title claimants of around 1 million hectares in the Pilbara region that include Rio Tinto mines and the mining town of Paraburdoo.

Of WTW’s 577 staff, only two identify as Aboriginal or Torres Strait Islander people, and the company’s action plan is intended to “increase that number significantly”.

It identifies 15 practical actions to drive relationships, respect, opportunities and governance. WTW has also committed to a review of its human resources procedures to identify existing anti-discrimination provisions and future needs.

WTW Head of Australasia Simon Weaver says highlighting career pathways, breaking down stereotypes and working hand in hand with Indigenous businesses to provide procurement initiatives and

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“We all come into cities and into our offices and we don’t have a lot of exposure to Aboriginal people, which leads to stereotypical thinking. That is really holding us back.”

become allies are on the agenda.

He stresses the importance of an authentic commitment and providing meaningful employment and enterprise opportunities to Aboriginal and Torres Strait Islander peoples.

The statistics around diversity remain problematic. While finance and insurance has seen one of the biggest improvements in its gender pay gap over time, decreasing by almost 10 percentage points between 2014 and 2020, it still tops other sectors with a 27.5% divide.

In the UK, a study last year found 32% female representation in senior management in finance – barely changed from 2017 – while the situation for ethnic minorities showed signs of going into reverse.

Fewer than one in 10 UK management

roles in financial services are held by black, Asian or other minority ethnic people.

There is also limited progress with social mobility, with a study of eight British financial firms finding 89% of senior roles were held by people from higher socio-economic backgrounds.

Mr Rhodes says he wants corporate Australia to understand Aboriginal beliefs around community and reciprocity and an attitude of “not just thinking about yourself”.

Insurers are in a unique position of influence, he says, as their wide customer base affords a spread of contact.

He is frustrated legislative progress appears to have stalled after Prime Minister Kevin Rudd’s national apology in 2008, and

says Dive In’s “ally for change” push can help drive the main point that the Uluru Statement from the Heart is actually a pressing issue.

“They just want to have a voice in laws and policies that directly impact them,” he says. “They want their voice enshrined in the Constitution so it can’t be taken away. It is a very complex area because it requires white Australians to get some self-awareness.

“That’s not a criticism. It’s just that we all come into cities and into our offices and we don’t have a lot of exposure to Aboriginal people, which leads to stereotypical thinking. That is really holding us back.”

Mr Rhodes says most Australians have little real appreciation of the aftermath of

Determined to make a difference

Excited by change: Beau Munn

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Award-winning broker Beau Munn is passionate about his Indigenous family heritage and determined to make a difference within corporate Australia, with an aim to be a mentor to Aboriginal and Torres Strait Islander children.

A descendant of the Dagoman and Gurindji people and recipient of the Valerie Baker Memorial Award, Mr Munn was formerly a mining account executive at Willis Towers Watson in Perth and director at Origin in Melbourne.

Today, he is a director at Mattiske & Henderson Insurance Services in the Victorian rural centre of Hamilton.

It’s a long way from his childhood in the Katherine and Wave Hill regions in the Northern Territory, where his mother, brother and sister still live.

Steadfast Executive General Manager Compliance and Customer Experience Sheila Baker – who sold Gold Seal to the giant broker group last October – says Mr Munn “thoroughly impressed the awards judges with his eloquence and passion to add value to his community”.

While he’s driven by the diversity and

inclusion drive, Mr Munn says insurers and other corporates run the gamut of quality in meeting the festival’s theme. They range from some companies leading the way to others who are well-intentioned but struggle to really make any impact. And some firms “are just there to tick a box”.

Scolding and media shaming only produces half-hearted and meaningless reconciliation efforts, he says.

Taking advantage of Indigenous expertise in traditional risk mitigation, especially with burn-offs to reduce the risk of large bushfires, is an example of a way insurers might make a difference.

Mr Munn also recommends more product innovation assisting Aboriginal medical centres and land councils, and more support for Aboriginal businesses.

“We are starting to put emphasis on procuring and training younger talent and more women, the focus on other cultures within the industry,” he says. “It’s an exciting time.

“There is so much voice for change now.

Once it starts moving it is hard to stop.”

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Passionate about diversity: Adam Rhodes

European settlement, from dispossession to loss of language, to being forced to assimilate, the stolen generations and exclusion from the Constitution.

Aboriginal and Torres Strait Islander children are six times more likely to die from suicide than non-Indigenous children. To reach parity with non-Indigenous Australians, the rate would need to be halved by 2031.

“The idea that kids as young as 10 can’t see a future for themselves is just horrible,” Mr Rhodes says. “There is still an awful lot of work to do”.

Insurers have embraced a wide range of collaborative initiatives in support of First

Nation Australians. Some examples: IAG was among the first companies in Australia to sign up for reconciliation action plans, and is also a champion of the referendum plan.

MetLife has signed up for Aboriginal cultural training by First Nations staff; Honan has partnered with Indigenous-led charity Children’s Ground; Zurich Australia unveiled its inaugural reconciliation plan last year and Suncorp its second; CGU’s Kayku Kumpa Awards celebrate First Nation small business owners; QBE has partnered with Stars Foundation mentoring Indigenous schoolgirls; and NRMA Insurance created artwork with Aboriginal land councils for

NSW billboards.

Mr Rhodes says people underestimate the positive impact acknowledgment of country, now frequently observed at insurance events, has on Aboriginal people.

He says this seemingly minor step can spark people’s interest and build momentum, taking Australia closer to the New Zealand model of celebration and pride in Māori culture. It relays to Aboriginal people that non-aboriginals are listening, he says, “that we get it, that we simply just acknowledge that they were here first”.

“It is such a simple act that we can all do. It is a positive step forward in recon0 ciliation.”

Here are the latest available details for this year’s local Dive In events (all times AEST unless otherwise specified):

September 22

September 23

• Aon: How does active allyship contribute to an inclusive workplace? 10am (Virtual) • Liberty Specialty Markets and Wotton + Kearney: D&I – intention to action! An interview with business leaders on how they changed their culture, 11am (Virtual) • Axa XL, Gallagher and Clyde & Co: Mental health in a post-pandemic world, 12pm (Sydney) • Dual, Kennedy’s: The labels that divide us, 3pm (Virtual) • Zurich, Sparke Helmore: Showcasing allyship from unlikely places, 4pm (Virtual and in person) • DLA Piper: Socio-Economic Diversity: How active allyship can help eliminate invisible barriers to career progression, 5.30pm (Invitation Only, Sydney)

• Chubb: Psychological safety journey (New Zealand), 6.30am (8.30am NZST) (Hybrid/ Auckland) • AILA breakfast seminar: From #metoo to #wetoo in the law, 8am (ACST) (Virtual) • AIG, Marsh, DXC: The AI influence: How will technology shape the future ally? 10.30am (Virtual) • WTW and From the Heart: Be an ally for change: How you can help to create a positive impact for Aboriginal and Torres Strait Islander peoples, 12pm (Virtual) • Chubb: Psychological safety journey, 1pm, (Sydney) • DLA Piper NZ, Dual: How active allyship can overcome inclusion barriers, 2pm (4pm NZST) (Auckland) • Gallagher, Sparke Helmore, NIBA: Active allies: Turning intention into action and hearing from leaders, 4pm (Brisbane) Go to https://diveinfestival.com/2021events/ for the latest information.

September 21 • AIG NZ, Marsh NZ and Wotton & Kearney: How remote/hybrid working can help and/or harm organisational D&I, 8am (10am NZST) (Virtual) • QBE: How cultural background impacts on LGBTIQ and people’s experience of work, 10am (Virtual) • NIBA and Gilchrist Connell: Nurturing diverse talent and ending discrimination, 11am (9am AWST) (Virtual) • Steadfast: Using allyship to create change with JJ Ferrari, 12pm (Virtual) • Lloyd’s and McInnes Wilson Lawyers: Harnessing inclusion: the next step, 4pm (Virtual)

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Parametric possibilities Could cover based around agreed sums and risk levels be a simpler option for catastrophe-prone northern Australia, and beyond?

By John Deex

Protecting assets: Mirage Country Club Port Douglas arranged parametric cyclone cover through Epsilon

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P

arametric insurance has been around for decades, but it’s still a new concept to many customers in Australia. Yet it could be an attractive alternative in under-pressure geographical regions.

So what is parametric insurance? It’s startlingly simple – paying out an agreed sum in the event of a specific and measurable weather trigger.

It means cover can be carefully tailored to match an insured’s risk appetite, exclusions are less of a concern and claims can be paid out quickly and efficiently as there’s no need for a detailed assessment of the loss.

Australian underwriting agency Epsilon – part of the UK-based Ardonagh empire – has started offering Lloyd’s underwritten parametric cover to north Queensland businesses, and there has been significant interest.

Epsilon believes this is just the beginning, with parametric cover particularly suited to Australia’s weather extremes and applicable to a wide variety of industries across the country.

Chief Underwriting Officer Paul O’Leary tells Insurance News the spark for the offering was the increasing insurance challenges faced by north Queensland strata properties due to tropical cyclone exposure.

“They were having to revert to going into the London open market to find solutions,” he says.

“As anyone knows, as soon as business is shown in

August/September 2021

the London open market it is immediately considered distressed business. And being distressed business, it gets treated that way – the premiums are significantly high and the deductibles are very high.

“It’s not the best solution.”

The catalyst for Epsilon to look more deeply into the parametric option came when a broker told the agency that traditional markets moving away from north Queensland business had “created a void”, and it had been able to engage MeteoProtect, a division of European brokerage Cooper Gay, which is now also owned by Ardonagh. Paris-based company MeteoProtect specialises in parametric cover and had previously enquired about opportunities in Australia.

“When this broker approached us it gave us a great opportunity to test how that would work,” Mr O’Leary says. “Our first foray was into parametric insurance around tropical cyclone and for strata-style businesses.

“We’ve now written several of these and we’re almost getting daily inquiries, and it’s expanded beyond strata business to clubs, hotels and pubs and the like.”

Mr O’Leary accepts that parametric cover isn’t a silver bullet to solve the region’s affordability issues.

While it’s not cheap insurance, it is generally cheaper than traditional options and provides much more flexibility.

“It allows clients to decide where they feel their risk exposures are and manage those risk exposures, and

“If we were able to take catastrophe right out of the property picture, you’d get a lot more consistency in pricing.” – Paul O’Leary, Epsilon

transfer the ones that they’re uncomfortable with at a price, but retain the risks that they feel comfortable with.”

A traditional policy might cover all cyclones, but have a relatively high excess, Mr O’Leary says.

The alternative is for a client to accept the risk of lower category cyclones but insure category 3, 4 and 5 events through a parametric policy.

This would enable them to take out a traditional property policy without the cyclone component, reducing the cost. The parametric policy also has no excess.

“The loss is triggered by an independent body, such as the Bureau of Meteorology, which tracks these cyclones,” Mr O’Leary says.

“And if it falls within the radius of the nominated property, then the policy triggers. There does have to be a loss, but it could be a consequential loss without damage to the property.

“And the policy will pay out quite quickly – usually within 14 days of being notified.

“The insured can use those funds to rectify the property or use it for expediting expenses – temporary accommodation, all these types of things – at a time when they really need it quickly. They can utilise those funds straight away.

“And then, it’s not until 210 days after the event that they then need to come back and justify what they’ve spent the money on.

“If they’ve met all the requirements, then that’s good. If they’ve spent more than they were initially paid, then the policy will pay further up to the limit. But if they haven’t spent all the funds, and they can’t spend all the funds on the property, or the damage, or the loss, then they would need to refund any unused payout.”

Parametric payments are always in cash – there’s no need for an insurer-sanctioned and insurer-managed rebuild, making the whole recovery process potentially simpler.

“I haven’t yet seen a claim in action,” Mr O’Leary says. “But I think it would make it a lot easier for the

insured to negotiate with trades if they’ve got cash to pay and the trades aren’t having to wait on insurers to say what’s covered and what’s not covered.

“So I think it would put the insured in a much stronger position to get work done. It stands to reason that that would be a strong bargaining point for the insured.”

After initially working with one Cairns-based broker, Epsilon now wants to expand the offering across the broker market.

And it also sees potential in using parametric policies to cover other catastrophe risks beyond cyclone, across the whole country.

“We’re looking at other types of triggers,” Mr O’Leary says.

“Lack of sunshine or drought, excess average rainfall, extremes in temperatures, bushfire…all these are triggers that can be insured under a parametric policy for quite an array of different industries including agriculture, hospitality, sporting events, and renewable energy.

“Even the likes of commodity traders and commodity miners can insure property that they don’t own.

“So if a port was struck by a tropical cyclone, they could say ‘that’s going to impact our business so we’ll take out a parametric policy with that as the point of interest’.”

Epsilon believes Australia is particularly suited to parametric cover due to the extremes of weather that it is regularly exposed to.

“Catastrophe exposures in Australia have been under-priced for a very long time by the traditional insurers,” Mr O’Leary says. “The way pricing changes after a catastrophe event is testament to that.

“If we were able to take catastrophe right out of the property picture, you’d get a lot more consistency in pricing.

“I think parametric cover has the potential to be the new way that catastrophe exposures are underwritten in Australia, because it’s such a scientific process.” 0

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“We are certainly here to challenge the status quo. We’re here to be different.

We’re here to provide choice.”

The Howden way Meet Matt Bacon, who is tasked with leading the UK-based global broker’s charge into the Australian broking market

By Bernice Han

T

he Australian broking space is not exactly the easiest terrain to navigate, especially for new entrants looking to challenge the status quo and build a presence in an increasingly competitive and crowded field.

But Howden Australia’s London-born Chief Executive Matt Bacon is relishing the challenges ahead of him as he works to grow the business into a major broking force.

“I love winning,” he tells Insurance News.

“We came into this certainly with a clear plan and a clear understanding of what we wanted to do and what we need to do to make this business a success.”

Not even what he refers to as the sounds of “agitation” from other brokerages in reaction to the launch of Howden’s Australian operation earlier this year fazes him.

“There are definitely certain factions of the broker community that are not particularly happy that we’re here. That’s pretty clear,” Mr Bacon tells Insurance News.

“But competition is a good thing. It improves our industry and ensures we provide a better service to clients and partner better with insurers.

“It improves the important roles that insurance plays in society as a whole”.

Mr Bacon took up the role in June, joining

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from Marsh, where he was chief executive of the Mercer Marsh Benefits business for the Pacific region. Prior to the 2019 merger with Marsh, he headed up JLT’s People Risk consulting business for Australia and New Zealand.

All in, he has accumulated nearly a decade of insights about the local market since moving to Australia in 2012 to take up the JLT role, placing him as possibly the best-qualified chief executive candidate to fulfil UK-based international group Howden’s Australia ambitions.

He says the consolidation at the top end of the market following the Marsh/JLT merger provides “a real opportunity to provide choice for clients and employees, for brokers and for insurers”.

Howden Australia will operate across the local insurance market from corporate to SME, focusing on local specialist industry and product segments such as financial lines, corporate risks, commercial and affinity, workers’ compensation, group risk and alternative risk transfer solutions.

Its corporate website says the mission is to challenge incumbency and complacency.

“What we’re not here to do is recreate what everybody else is already doing,” Mr Bacon says. “I would say we are certainly

here to challenge the status quo. We’re here to be different. We’re here to provide choice.”

More than a month into his job, Mr Bacon says nothing he has observed so far in the market has tempted him and his management team to believe they need to recalibrate their Australia strategy.

While he declines to share the specifics of what the strategy entails, Mr Bacon says it’s a “very clear business plan” that is anchored partly by hiring the “best specialists”.

“Our staff are handpicked and they’re absolutely leaders in their field,” Mr Bacon said. “As a result, Howden clients are getting best-of-breed practitioners across the board with service standards to match.”

He says he has drawn inspiration from numerous business and sporting sources, but picked out the victorious England rugby team that won the World Cup in 2003 under coach Clive Woodward, who famously coined the acronym T-CUP. “It refers to Thinking Correctly Under Pressure,” Mr Bacon said. “It means to prepare to the nth degree and leave no stone unturned so there are no surprises. Applying this ensures that when you make a decision you can act very swiftly and with conviction.

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Aftershocks Swiss Re’s annual Sonar report on emerging global risks looks beyond the darkest days of the pandemic

A

bout this time last year, the foreword to Swiss Re’s Sonar report included a suitably sombre told-you-so: the reinsurance giant’s annual run-down of emerging global risks had flagged pandemic threats on at least three occasions since its inception in 2013.

A year on – and with the vaccines slowly rolling out – Sonar 2021 looks beyond the coronavirus crisis, focusing on some of the flow-on risks, plus a handful of other threats worth tracking as all eyes, hopefully, begin to turn away from COVID-19.

As Swiss Re’s Chief Risk Officer Patrick Raaflaub notes, it is important not to lose sight of the dangers that were already looming – particularly the existential ones.

“When COVID-19 emerged in late 2019, few could have predicted the magnitude of its impact,” he says. “Many of the actions taken to mitigate the pandemic have themselves created new risks.

“As (re)insurers, it is essential that we have the best possible understanding of these emerging risks.

“It is also important to remain vigilant on the emerging risks that are already known – especially regarding climate change – as these will impact us for years to come.”

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Stop-start One of the most high-impact threats flagged in Sonar 2021 flows from the pandemic and, more specifically, the global recession it triggered.

As Swiss Re acknowledges: “Typical industry [pandemic] models had focused on potential mortality … yet, many impacts of the COVID-19 pandemic specifically relate to the sudden lockdown measures-induced halt to global economic activity to an extent that had not been foreseen.”

The report notes that in the global oilfield services industry, maintenance budgets were cut by $US20 billion last year as belts tightened, while facilities such as chemical plants, mines and power plants have been similarly affected.

“A consequence of a global economy in trouble has been a squeeze on maintenance budgets in many industries, and a delay to planned works.

“Across many industries, as a savings measure, the choice has been to mothball facilities rather than use the downtime for maintenance.

“In addition, qualified and experienced staff have either been laid off and/or, due to restrictions on mobility in lockdown, not

able to travel to sites of work.”

Restarting a mothballed facility comes with acute risk. In the refining, petrochemical and chemical industries, research shows up to half of process safety incidents or major losses occur during start-ups following shutdowns. The rush to restart while budgets are still depressed may heighten the risk, Swiss Re says.

And the same danger applies to industries not involving hazardous materials, such as aviation.

“Planes that have been mothballed will be reactivated as demand for air travel picks up…pilots will resume work after a long period of no or less flying time,” Swiss Re says.

“Human error accounts for two-thirds of root causes in aviation and other man-made accidents, and rusty flying skills as carriers ramp up their operations could be an additional risk.”

General insurers are urged to focus on “three pillars” – adequate funding, time and the availability of experienced and qualified staff – as client companies return to normal post-pandemic conditions.

As the Sonar report notes in a separate entry on the storage of hazardous materials in urban areas, we need not look back far to see the potential consequences of industrial

Raised risk: stopping and starting facilities such as oilfields increases the chances of a major loss

accidents. In one of 2020’s “other” tragedies – an astonishing incident, quickly nudged off news lists by the next wave of COVID stories – an ammonium nitrate stockpile explosion wiped out a vast section of Beirut’s port area, killing hundreds, injuring thousands and causing about $US15 billion of property damage.

Insurers are reminded that in assessing risk, even if insured sites adhere to robust regulatory standards, “additional analysis of the location with respect to surrounding population and land use, and exposure to natural perils that could trigger an accident, is required”.

The living dead When the pandemic struck and economies went into meltdown, governments around the world reached for the button marked “stimulus”, writing cheques to keep companies and workers alike from bankruptcy, cutting already low interest rates and issuing credit subsidies.

But, as Swiss Re notes, some of the companies taking advantage of such subsidies were far from viable to begin with. These are the “zombie firms”, unable to service their debts. And, while they are nothing

new, their numbers may be on the rise.

“Two pieces of evidence are worth considering,” the Sonar report says. “First, according to data from [ratings agency] S&P, the global default rates in 2020 were lower than in past recent crises and are expected to remain below peak levels, highlighting the effects of the [support] measures taken.

“And second, according to the Institute of International Finance, non-financial corporate debt in the US has risen from less than 75% in [northern] autumn 2019 to more than 90% in spring last year, while bank loans to SMEs rose by 6%.”

The report says zombie companies could threaten banks that are exposed to non-performing loans when interest rates start to rise again, and they may also dent a country’s productivity.

For insurers, particularly in credit and surety lines, the danger lies in knowing which companies are insurable risks.

Failing the test This year’s top-rated threat for casualty insurers comes in the shape (literally) of a crash test dummy.

“Making products safe for human use is not an easy task, not least because product

testing needs to keep up with demographic trends,” the report says.

“This includes adjusting test conditions and results for gender, and changes in weight, height, age and others. Failure to do so can have fatal real-world consequences.”

Crash test dummies, it says, are mostly modelled on the average male, which may help explain why women are 47% more likely than men to incur severe injury in a car accident, and why in Europe between 2010 and 2017 the proportion of elderly people hurt or killed on roads had risen, even as the general trend has been for fewer injuries.

Swiss Re also notes that, historically, men have been more likely to participate in drug trials than women, but “at rest metabolism in females is typically slower than in males. This means dosage levels determined by study results on males can be too high for women.”

When safety-testing products, a lack of diversity in terms of size and shape of test subjects – plus gender, age, ethnicity and genetics – could prove disastrous for insurers.

“For insurers, particularly in fields where product use could lead to bodily injury or health impairment, risk assessors should fully investigate the data set used by regulators as the basis for product approval.

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“If test populations are not representative of end-user groups, a more cautious underwriting approach makes sense. This is especially so where potential for serial losses exists due to fast rollout of new products to many consumers.”

Breaking the chains Modern slavery – and global attempts to stop it – could increasingly affect the operations of insurers and their corporate clients, and prompt an “avalanche” of liability claims.

Swiss Re says more than 40 million people are victims of worker exploitation, forced and child labour, trafficking and

forced marriage – plus other crimes covered by the modern definition of slavery. It is estimated 16 million of these work in the private sector.

And this is not some distant, “third world” problem. Advocacy group AntiSlavery Australia says more than 1900 people in this country are slavery victims. For example, in April a Melbourne couple was found guilty of keeping an elderly woman prisoner in their home for eight years, paying her a few dollars a day to cook and clean.

The Sonar report says modern supply chains are global and complex, “with many agents involved at different stages. As such, it can be difficult to trace the origins of a

final product and to identify occurrence of human rights violations along the production path.”

It notes that along with growing shareholder pressure more stringent anti-slavery regulations have recently been introduced in markets including Britain, California, France and the Netherlands.

“More rigorous laws and growing expectations of due diligence give rise to new liability risks. A first successful claim based on the new regulations could lead to an avalanche of subsequent claims.

“For insurers, this means more detailed appraisal of the issue of modern slavery in underwriting, notably with respect to direc0 tors’ and officers’ liability covers.”

Overview Emerging risk themes impact and timeframe 0 – 3 years

Restarting suspended operations – larger accidents ahead?

Health tracking

Electric scooters and beyond – micromobility risks

devices – hidden risks in wearables?

Modern slavery – pressure on supply chains Beirut explosion – dangers of hazardous materials

Sonar signals

> 3 years

Zombie companies – sustained by COVID-19 support

Income inequalities – pandemic hurts the middle class

Lack of diversity in product testing – safe?

COVID-19 – the longerterm health burden

Most affected business areas

Potential impact

for Property & Specialty Lines

for Life & Health

for Operations incl. regulatory changes

for Financial Markets incl. insurers’ assets

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for Casualty

High Medium Low

This year’s Sonar report features nine emerging risk themes based on early signals collected over a year by the reinsurer’s internal crowdsourcing platform, which collects input and feedback from underwriters, client managers, risk experts and others across the company.

The themes “do not reflect entire industry-wide thinking with respect to emerging risks, nor necessarily the full list of associated topics currently on Swiss Re’s radar screen”, the report says. They are categorised according to their estimated impact and time frame, and the insurance lines where the biggest exposures lie.

‘Nobody wants ASIC on their doorstep’ Brokerages adding ARs to their ranks must keep a watchful eye on increasing compliance obligations

By Wendy Pugh Remote risks: Kiersten Lethbridge says flexible working has added to compliance pitfalls

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wo completely different trends in insurance – the proliferation of authorised representatives (ARs) and new directions in financial services regulation – have created a scenario where expanding brokerages can find themselves facing issues they didn’t see coming.

The Hayne royal commission has spurred financial services scrutiny, with new requirements continuing to come into effect even as the COVID-19 outbreak adds another complicating element into the mix.

Kiersten Lethbridge, the Principal Consultant at broker software consultancy Consolidated Business Solutions (CBS), says many brokerages are on the AR acquisition trail, but Australian financial services licences can easily be put at risk if compliance systems don’t keep pace with changes in the business and regulatory environment.

“There is not a desire to do the wrong thing, but it can easily happen,” she tells Insurance News. “We have all been working remotely and there’s not the regular contact we might have had, and regulations have tightened over time.”

A joint venture between compliance management firm Guildfords and CBS is offering to assist licensees with regular independent reviews to detect and remedy potential problems to avoid AR-associated issues slipping between the cracks.

While large broking groups will

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typically have internal compliance monitoring arrangements, Guildfords is targeting the growing number of firms that take on anywhere from a handful to 20 ARs. Ms Lethbridge, who was previously at Ebix Australia as manager of its Heart and WinBEAT broker systems teams, says broker licensees can no longer afford to give ARs the level of free rein that may once have been possible. At the same time ARs that have decided to work under someone else’s licence have to adjust their mindset.

“We are dealing with small business operators who may have had their own brokerage acquired but still tend to behave independently,” she says. “They actually have to act within the authorisations of the licensee, not the way they might have once under their own licence.”

Guildfords Managing Director Robert Payne says changes coming into effect this year that add to the compliance load include strengthened breach reporting obligations that take effect from October 1.

Such obligations link back to the monitoring and supervising of authorised representatives and documentation requirements, as well as training obligations that have broadly been in place for some time but which must keep pace with regulatory changes.

Dr Payne says the effect of COVID-19 on compliance has also been profound, given implications for supervision and training, as

personnel have switched to webcasts, conference calls and different ways of working that are remote from the licensee.

“That has to be wound into a monitoring policy that takes into account these issues that are brand new,” he says. “That is the new world.”

ASIC has emphasised the need for licensees to provide authorised representatives with around the clock access via remote compliance management systems for the policies under which they operate.

“Some ARs don’t understand that they might be undertaking certain functions within their company that are not covered by the authorisations, or the licensee might not have the authorisations on its licence that allows the AR to undertake a new area of business,” Dr Payne says.

“They should know that, and the licensee should be always monitoring the AR in relation to their business and their day-today financial activities.”

Dr Payne says the industry should expect trends that have driven a more challenging regulatory environment in the wholesale and retail space will continue to develop.

Examples include the increased emphasis being placed on the integrity of licensees and those who hold responsible and controlling positions.

ASIC has released an information sheet on “fit and proper persons”, and it is becoming more important for licensees to really

know who their ARs are and to have full information on their backgrounds.

“That is directly as a result of the Hayne royal commission, and I don’t think that is going to just stabilise,” he says. “I think that is going to be constantly enforced upon licensees to be more vigilant.”

Brokerages with a relatively small number of ARs face particular challenges in keeping pace with changes and ensuring they undertake required responsibilities, while Guildfords-CBS notes that for any organisation there are advantages to be gained from an independent external review.

Dr Payne and Ms Lethbridge recommend a compliance review every six months, following a set system for completing their process.

Ms Lethbridge, who is an expert in software and broking systems, says in addition to digging down into the systems the reviews also provide the opportunity to assist with education.

“Brokers don’t necessarily have the time to be buried in software training or how to use the document management system and that’s where we can assist with some extra service,” she says. “We tend to try and guide and train as part of the process.”

Reviews also look at website compliance and whether businesses have disaster recovery and business continuity plans, with licensees required to have adequate risk management systems in place.

The review process involves randomly selecting invoices covering transactions including new business, renewals, endorsements and cancellations. Each type of transaction has a different set of activities associated with it, and there are checks to ascertain if those have been completed.

“It is a pretty thorough process because they don’t know what we are going to look at and we dig deep down into their software systems,” Ms Lethbridge says. “We are not just asking questions, we are actually looking to see what they have done.”

Even when required tasks have been undertaken correctly, there’s often issues surrounding document storage, which risks leaving an inadequate audit trail when it comes to proving that everything that someone says was done actually was done.

More often than not oversights and deficiencies can be highlighted and attended to through straight-forward conversations and solutions, but the reviews also ensure more concerning matters can be brought to light.

“Our licensees want to make sure that if we find something that is serious that has to be reported back to the compliance committee, that we have the autonomy to make sure that it is exposed, which is why an independent review is really important,” Dr Payne says.

The stakes are high, as ASIC has been given a clear mandate to step up its scrutiny,

and its announcements regarding various actions taken on AR and licensee breaches highlight the fact that there’s no room for complacency.

If licensees get it wrong they are answerable to the regulator, and Ms Lethbridge says it’s up to them to ensure they maintain high compliance standards.

“Nobody wants ASIC on their door0 step.”

Regulatory burden: Robert Payne warns the compliance load increases from October

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Expanding possibilities Resilium’s new chief explains why the network can look to an exciting future as part of Ardonagh Focused on growth: Ben Hastie

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ashed-up and confident, Resilium has set bold growth targets for the next five years and has a myriad of ways to deliver on them.

The previously Suncorp-owned authorised representative (AR) network went through a successful management buy-out in 2019, before unforeseen complications with the deal’s funding reared up.

Those issues were consigned to history when early this year the UK-based insurance group Ardonagh acquired a majority stake in the business and positioned Resilium at the centre of its Australian growth ambitions.

Ardonagh has since established Ethos Broking Australia, with former Resilium leader Adrian Kitchin moving across to become Ethos Chief Executive.

Former Director Broking Ben Hastie has stepped up as Resilium Managing Director, to steer the network into a new era.

Mr Hastie, who had been with insurer Chubb for 11 years, was recruited by Mr Kitchin in 2016, and tells Insurance News he is delighted he made the switch.

He believes that while Ethos is pursuing brokerage acquisitions new opportunities will open up for Resilium too.

“Adrian realised pretty quickly that he and [Ardonagh Australia Chairman] Paul Lynam are going to be very, very busy doing the Ethos thing, and asked me to manage Resilium, although he’s still here for me to bounce stuff off.”

The backing of Ardonagh makes Resilium an even more attractive proposition for current and future ARs, he says, and opens up huge potential for it to expand and acquire businesses under the Resilium Partners offering.

Resilium has 140 practices and 600 individual ARs, operating Australia-wide. Most ARs are independently owned and trade under their own name but, thanks largely to

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the Ardonagh deal, Resilium is able to buy a stake in some.

“Ardonagh became very attractive as far as having a big war chest to acquire a majority stake, or 100%, of ARs that were ready for retirement or to sell their business, and therefore we would not lose them from the network,” Mr Hastie says.

“That’s an ongoing progression.”

Acquisitions under Resilium Partners were already part of the plan, but Ardonagh has turbo-charged this side of the business, as well as making it more appealing to traditional ARs. “Acquisitions were going to happen anyway, just on a much smaller scale,” Mr Hastie says.

“We wouldn’t have had the borrowing capacity to do too many. We would have made one or two a year.

“Whereas now, as long as the deals stack up, we are not limited by borrowing capacity because we have this global partner behind us.”

But acquisitions will primarily be driven by the network’s ARs and their needs, he says.

“First and foremost we are an AR network, and this is a ‘nice to have’ additional service.

“We are basically providing a succession plan. When they want to sell, it’s not a hard process, we know their business intimately.

“The ARs that don’t wish to sell… are just as important to us now and in the future.”

Mr Hastie says Resilium’s ARs are a tightknit group, who also embrace newcomers.

And the network’s focus on providing more than just a licence is a major draw.

“The origins stem back to AMP General Insurance days and some ARs have been together all that time – 20 or 30 years.

They are lifelong friendships. Once you’re in you’re in. But the older established

ARs don’t keep to themselves, they open up and embrace new people. It’s a family feel.

“We provide a variety of services other than the licence. We are really strong on training and education, we’ve got an internal website that hosts a lot of videos that we’ve done.

“We also have a strong leads program.

We receive leads and we give them out to ARs free of charge. That’s a strong attraction to the network.

“Our mantra for some time now has been growth through professionalism. That’s why we talk about the education being so important to us.

“We feel that the way to differentiate going forward is to have the most technically advanced, knowledgeable and experienced ARs in the country.

“We talk about them being the trusted adviser to their clients on all risk matters.

That’s the best way to drive retention, to be someone that the small or medium-sized businesses can’t do without.”

Currently hitting about $500 million in gross written premium, Resilium wants to be at $1 billion in five years’ time.

“We basically want to double the size of the network,” Mr Hastie says. “That includes some Ethos purchases as well; it’s the whole group.”

And further down the track, expansion could go beyond Australia’s borders.

“We’ve flirted with the idea of New Zealand and beyond but at this stage, particularly with COVID, it would be way too hard.

“But definitely, down the medium to longer-term track, we will look at New Zealand and perhaps even Asia.

“Once you have that structure running like a well-oiled machine it can be replicated 0 in other regions.”

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Vero keeps customers afloat The insurer is providing grants to help SMEs get through the COVID storm

By Miranda Maxwell Happy to help: Vero’s Anthony Pagano is proud to have given small businesses a boost

N

SW-based chocolate manufacturer Praline Holdings was poised to expand to international markets last year when the COVID pandemic dashed its plans with an 83% plunge in sales and cancelled orders.

Fortunately, the chocolatier’s broker, Kim Gilbert at Zenith Insurance Brokers, suggested Praline could apply for a Vero Business Recovery Grant.

Vero was offering $20,000 lifelines to policyholders who were finding the going tough in the pandemic uncertainty.

Praline used the grant to invest in a more advanced production line, allowing it to broaden the variety of its chocolates to bring it into line with the “COVID-normal” economy.

Since that injection of cash Praline has thrived, and Manager Angus Suttie is now optimistic the confectioner can grow sales and markets domestically and abroad.

It’s one example of how Vero is helping besieged Australian businesses, and their brokers, as COVID-induced changes also alter customer behaviour.

Vero established its Business Recovery Grant after the onset of the pandemic last year, with $250,000 in the coffers. Brokers have been encouraged to alert eligible SME businesses to apply for between $5000 and $20,000 to regain market traction.

“To witness first-hand how Vero’s grant has helped Praline to develop new products and markets is truly a remarkable and proud feeling,” Vero Head of Commercial Intermediaries Anthony Pagano said. “Our initiative shows the power of this partnership as Praline recovers and becomes a stronger business in 2021.”

The funds have bailed out SMEs across Australia in a range of industries, with many now thriving or diversifying their business

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operations thanks to the additional support from Vero.

The grants also helped brokers engage with their clients in new ways as they steer their way out of the pandemic, reconnecting with customers and returning to profitability.

“The goal of the grants was simply to help Australian SMEs doing it tough and provide them with the kickstart needed to help their businesses bounce back,” Mr Pagano says.

“We’re looking forward to continuing to work with and support our brokers, clients and the communities they operate in as we work through the ongoing challenges caused by COVID.” Certainly Vero is staying upbeat and helping brokers and customers alike to look on the brighter side of life. Mr Pagano’s team has also organised pop-up food events at brokers’ offices, showcasing a range of local fare, as well as baristas, gin and whiskey bars, taco and hamburger food trucks and dessert bars.

Vero has also booked drive-in cinemas across the country and organised family fun nights and gift packages sourced exclusively from Vero customer products. These include baked goods, confectionery, chocolates, beverages…and even a virtual make-up tutorial as brokers were encouraged back into the office.

Vero’s latest initiative is supporting online marketplace platform Buy Aussie Now, a one-stop-shop for local businesses to showcase their wares.

The insurer is the first organisation to back Buy Aussie Now’s Corporate Rewards Program. It sponsored the initiative to the tune of $150,000, with Mr Pagano saying it was a perfect opportunity to support homegrown businesses and the families who run them.

Olympic gold medallist and Buy Aussie Now ambassador Mack Horton welcomed Vero to the project, saying the power to make a difference “is now in our hands.

We are proud to team up with Vero to help Aussie businesses thrive and harness broker relationships to make a difference.”

In another Vero grant success story, industrial textile printer firm Impression Technology from Sydney’s Frenchs Forest was helped after it experienced a 70% plunge in sales due to COVID. “Early in 2020 our business stopped,” Chief Financial Officer Rod Austin said.

“There were no sales enquiries.”

Broker Samantha Chan from Scott & Broad suggested a Vero grant application and this allowed Impression to redirect its focus locally and market directly to small businesses and consumers for the first time.

“We used the grant money to introduce new products tailored for this audience, which revitalised the existing range and increased sales leads,” Mr Austin said.

“The grant gave Impression Technology the conviction to kickstart 2021 and to get the wheels turning again.”

Another Vero grant was awarded after not-for-profit 1-World Charity Shops was forced to halt expansion in Underwood, Queensland early last year, with border restrictions postponing a new opening while wages and rent costs racked up without projected sales from the additional store.

Ardrossan Insurance Brokers recommended a Vero application and $10,000 was awarded, funding new signage for the eventual store opening, in October.

“The grant fast tracked our ability to recover,” 1-World Chief Executive Matt Dudgeon said. “The opening exceeded everyone’s expectations and smashed previous 0 records”.

companyNEWS 0

Hybrid home: QBE takes up residence in new office QBE relocated its Sydney head office to 388 George Street in the city’s CBD precinct in June, two years after signing the lease for its new corporate home.

The insurer is a major tenant in the 28-storey tower, which has undergone a $200 million revamp.

QBE says the new office has been designed to support hybrid working, once the current Sydney lockdown is over. It also describes the office as one that is an “activity-based workplace with state-of-the-art technology that has been refurbished with sustainability in mind”.

“It makes it simple and seamless for us to collaborate, no matter where we are,” QBE says on its LinkedIn page.

Chief Human Resources Officer for Australia Pacific Shiona Watson, an advocate for hybrid working, says the new office design is “really thinking about work as something we do, rather than a place we go”.

“We work flexibly, making the call on when we’re in the office or at home based on when it makes sense for the things we’re working on, where the rest of our team is and the needs of our customers,” she said.

A special event was held to celebrate the move, with Chairman Mike Wilkins and Chief Strategy and Transformation Officer 0 Fiona Hayes-St Clair in attendance.

Future ready: the new office enables flexible working

Positioned for growth: CBN sets direction with team changes Community Broker Network (CBN) has completed a business strategy review, made structural changes to its team and announced appointments as it focuses on key priorities.

Chief Executive Richard Crawford says the review outcomes will ensure network members are in the strongest position possible to run and grow a successful business.

“The review priorities also included initiatives targeted at the new regulatory environment, capitalising on the rapid evolution of technology and leveraging data and analytics in the development of new propositions,” he says.

“For example, a review of network-wide claims data will allow us to equip our authorised brokers with additional resources and tools to deliver risk management insights and capability to better protect their

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clients.”

As part of the changes, management of network members and insurance partners will be consolidated into one team, led by Leigh Frost as Executive Manager – Distribution.

“This structural realignment is designed to shorten the distance between our network, business partners and the market, better leveraging resources to support network broker requirements,” Mr Crawford says.

Mr Frost, who will be responsible for the long-term success of the authorised broker network, has more than 25 years’ experience in insurance and financial services. He joins from Willis Towers Watson where he was Leader, Commercial and Private Clients and has also served as National Insurance Brokers Association Victoria/Tasmania

Committee President since 2019.

John O’Brien, who has worked in corporate and commercial insurance locally and in London during a broking career spanning more than two decades, takes up the role of Head of Placements. He will report to Mr Frost.

As part of the changes, Wendy Foweraker becomes Executive Manager – Broker Operations.

“Wendy will lead CBN’s ambitious plans in resource development and support to the network, ensuring we continue to deliver a superior customer proposition, in addition to readiness for the upcoming regulatory changes,” Mr Crawford says.

In other appointments Kathryn McClunie becomes Head of Broker Development, while Samantha Palmer takes on the role of leading CBN’s broker partnering services. 0

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‘A great day in great weather’ The Lloyd’s Australia Golf Society was thrilled to host more than 120 golfers at its second annual LAGS Cup in Sydney on the last Thursday in May. Held at the picturesque Manly Golf Club in perfect conditions, golfers competed for a range of trophies.

New President Tim Higgins and John McCafferty secured the LAGS Member Cup while Marsh took the Broker Cup, Wotton + Kearney the Lawyer Cup and Sedgwick the Service Provider Cup. “We think it is fair to say that everyone had a ball,” the Society posted on social media.

“So many winners, new trophies and the odd dad joke!

“A great day, well organised in great weather. Our thanks to the 0 Manly Golf Club.”

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maglog > S

etting aside the dark shadow of pandemic uncertainty that sits over much of Australia at present, and also ignoring for a moment the damage that regulatory changes and a long string of natural catastrophes have wrought on locally owned insurers’ annual returns, there is a question which has been lingering for several months without an answer. That is, are Australia’s insurance leaders a bunch of “woke” corporate activists?

The question – raised by a federal minister – arises from the long campaign of India’s Adani Group to secure insurance for its Carmichael coal mine in north Queensland.

Adani was fairly low-key in its drive over the past couple of years to secure long-term insurance cover from local and/or international insurers, even as it battles growing opposition from opponents who see coal as a prime cause of climate change and an existential threat to the planet.

But Adani is not alone. In May it joined the entire fossil fuel industry in howling out their frustration during a parliamentary inquiry into the prudential regulation of investment in Australia’s resources sector and other export-led industries.

The inquiry, called by the Joint Standing Committee on Trade and Investment Growth, hasn’t reported to Parliament on the issue yet, and no one seems to know when it will.

While they would be expected to complain that insurers aren’t playing fair, Adani and other fossil fuel companies told the inquiry the insurers’ “misconceived” decision to end or reduce their involvement with the non-renewable energy sector risks harming Australia’s economic prosperity.

Squarely in the firing line were IAG, Suncorp and QBE, who have each announced deadlines to cut their links with the thermal coal industry.

“These Australian insurance companies appear to have followed a global divestment push led by European insurance companies with little to no regard to their national responsibilities to the workers and companies of Australia,” Adani says.

Privately owned Brisbane company BMD Constructions joined in, saying it had been unable to secure the insurance it needed to construct a section of the railway line linking the mine with the port at Mackay.

“It cannot be the case that companies performing lawful, government-supported works on which the country is dependent, are not supported by the finance and insurance industries that allow these works to be performed,” BMD said.

One of the figures behind the parliamentary inquiry is National Party MP Keith Pitt, who has been Federal Resources, Water and Northern Australia Minister since

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By Terry McMullan

last November. We know where he stands on this issue because when the inquiry was launched in February, he went full redneck in blaming the coal miners’ finance and insurance dilemmas on “corporate activism”.

So, are insurers within their rights in refusing to provide insurance? Can we expect a shower of recommendations to spring from the committee for legislation that forces insurance companies to provide cover?

And (most intriguingly) are the insurance industry’s Zegna-suited chief executives really a bunch of radical activists intent on destroying capitalism in a quest to save the planet?

To spare you the suspense, the answers are yes, almost certainly not and no.

The fossil fuel industry’s undoubted political power, and the importance of the coal-mining electorates to the federal Liberal/National coalition can’t be underestimated, but let’s be clear about this.

As the past few years have demonstrated, the insurance industry is paying the price for governments’ slow progress in meeting the challenges posed by an existential threat, global warming. By imposing premium rises that equate to the technical cost of the risk, they are doing their job. They are also protecting their companies when they show little or no interest in protecting coal miners’ assets.

They are merely reflecting the international (re) insurance industry’s determination to not support projects that bring our world ever closer to a horrendous future.

Australia’s prudential regulator requires insurance companies to hold substantial reserves and sufficient reinsurance so they can pay claims. It also requires them to “actively consider” the direct and indirect effects of climate change so they can take “effective action” now to promote strong understanding and management of the potential financial impacts of a changing climate on current and future business prospects, allowing well-managed entities to minimise costs and optimise benefits.

For investors, the issue is apparently a no-brainer.

As Insurance Council Chief Executive Andrew Hall has pointed out, major investor groups around the world simply want the industry to treat climate change as a major financial risk.

As individuals, we who work in the insurance industry have a right to be sceptical about climate change, even if such scepticism requires us to ignore the increasing threat to the industry from Nature’s increasingly volatile behaviour.

But as a collection of companies that belong to an interlocked global system of financial protection, the insurance industry has no choice but to hold to its belief that activities which bring climate change and its asso0 ciated perils closer are increasingly insupportable.

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1ST IN 23 CATEGORIES 2020 NIBA Broker Market Survey

OVERALL

BEST BROKER EXPERIENCE

Is a trusted partner* Underwriting overall satisfaction Is a brand that delivers on promises

Overall satisfaction*

Overall opinion versus other insurers*

Responsiveness

Work with me to find a solution for my client

Understand underwriting for my client’s needs

Have expert knowledge in specific product areas

Are comfortable having complex or challenging conversations

Communicate when underwriting appetite has changed

Takes ownership for resolving my business issues and follows through on commitment

Willingness to negotiate for the benefit of my client

Takes the time to learn about my business and client needs

Strong product knowledge and technical expertise

ACCOUNT MANAGEMENT

Account management overall satisfaction

Responsiveness to my needs and the needs of my clients

PRODUCT EXPERIENCE

Underwriting flexibility

Ability to tailor a policy to suit my client’s needs

Product coverage and wording that suits the needs of my client

Policy conditions and cover

CLAIMS EXPERIENCE

BRAND EXPERIENCE

Staff are knowledgeable about what the product covers in the event of a claim

Develops and maintains strong relationships

* Liberty Specialty Markets shares the first place ranking with other insurers in these categories.

The independent NIBA Broker Market Survey was conducted from July to August 2020 and compared 18 general insurers in Australia.

Liberty Specialty Markets is a trading name of Liberty Mutual Insurance Company, Australia Branch (ABN 61 086 083 605) incorporated in Massachusetts, USA (the liability of members is limited).