There are numerous issues from the soft market era that have not been addressed in the current market, and until they’ve been properly attended to, the re/insurance industry is going to end up where it started, according to Group CEO and CUO of Connect Underwriting, Jamil Elbahou.
ConnectUW is a specialist insurance and reinsurance underwriting group and Lloyd’s coverholder with operations in the UK and Europe. As a London market for property, energy and war and terrorism on a FAC XoL basis, it’s becoming a mature business with its own niche in the marketplace.
At the 66th Rendez-Vous de Septembre in Monte Carlo, Reinsurance News spoke with CEO Elbahou about some of the issues in the market, from models to inflation, as well as advanced technology and what the near future holds for the group.
“The biggest problem we have is coverage,” said Elbahou. “Some wordings from the soft market remain unchanged, for example with contingent business interruption and pandemic extensions still being thrown in. There’s also challenges with things like underinsurance, the stacking of sub-limits, client retentions and inflation, which are often overlooked in terms of valuations. We should be asking for up-to-date valuations on an annual basis, and that’s not happening.”
These issues, he stressed, have simply not been addressed.
“Sure, some exclusions were added, we raised prices and reduced the scope of conditions a little, but not significantly enough to avoid ending up where we started,” added Elbahou.
It’s clear that the CEO feels that inflation isn’t being fully accounted for, and he warned that the market is essentially charging less than before because of this.
“That’s the funny thing,” he said. “We talk about the hard market, but in reality, if our prices don’t go up sufficiently, they’re actually getting cheaper. When we price renewals, if we don’t achieve at least a 5-6% increase every year then we’re effectively giving reductions.”
Another challenge highlighted by Elbahou during our conversation at RVS 2024 concerns models, specifically the need for models to be dynamic and properly account for the high inflationary landscape.
“You do need models, and you certainly need the guidelines and the labelling of the various zones is certainly helpful, but I feel that the models are inappropriate. It’s not that they’re necessarily inadequate or the methodology is wrong, and it’s not about the people, companies or even the technology, but I just think that at the speed that inflation is moving, the models aren’t keeping up with the changing dynamics,” stated Elbahou.
“I think these models have to be dynamic to the extent that they are active propositions. Maybe the time line between the updating of the models and what actually occurs in the market, coupled with inflation, could improve. When you PML a loss, I don’t think that the modelling considers the record high inflation and devaluation of currencies that we have all over the world,” he added.
Whether it’s even possible for the models to do this is unclear, and while Elbahou emphasised that they are great tools, he feels there will always be a gap until artificial intelligence (AI) really has an impact.
“They’re great references, but you can’t run, in my opinion, your underwriting business based on what the model says. The model may indicate things are fine but human experience and expertise is still very much needed to make the final decision.
“Everybody’s doing what they can, and until AI really sinks its teeth into modelling there’s always going to be a gap. So, the message is, in summary, I don’t think we should stay comfortable with the models that we have and treat them as gospel, because there’s just more elements at play,” said Elbahou.
To end, Elbahou told Reinsurance News what the near future holds for ConnectUW as it becomes a mature business.
“It’s got its own niche in the market and it will continue to grow organically,” he explained.
In 2023, ConnectUW launched London-based MGA Stability Risk, and Elbahou noted that the group’s new MGAs will be a key focus over the coming months.
“Stability Risk is starting to stand on its own two feet. I’ve launched two new MGAs in the span of six months and those are going to be taking a bit of our attention to get those going,” said Elbahou.
Another area where the CEO sees exponential growth for the company is the war and terrorism space.
“That has been a very large growth area for us due to our intricate understanding of the geopolitical landscape in places like the Middle East and Africa.
“When we write in Lebanon, for example, we know every street, it’s literally street by street. We are pretty analytical when we write, and it’s enabled us to take advantage of the current climate.
“So, I really feel that part of the business is going to go from strength to strength, and we’ll see where that takes us. We do have large ambitions in the political risk space,” concluded Elbahou.
