Aon Benfield Asia-Pacific CEO Malcolm Steingold says the industry must “pivot towards emerging risks”.

At the group’s biennial Hazards Conference on the Gold Coast last month, Mr Steingold made three key recommendations to help insurers to stay relevant in a “shifting market”. 

He says insurers must leverage their “record capital levels” to recapture risks lost in previously hard markets.

Mergers and acquisitions (M&A) will continue to amplify this trend, especially for mid-tier (re)insurers “squeezed” by risk-based capital and regulatory requirements.

Mr Steingold says this year has produced a “marked” increase in the number and size of M&A, allowing the big players to retain more risk and buy less reinsurance, and create stability for clients while diversifying their offerings.

He says M&A has also enabled new business through new channels and geographies.

Mr Steingold’s second recommendation is to develop covers for emerging risks such as cyber and contingent business interruption.

He says even though cyber losses are estimated at more than $445 billion, many countries have made little or no effort to produce loss estimates.

He says six to eight insurance companies have cyber gross written premium (GWP) of $10-$25 million, four have $25-$50 million and only two or three have cyber GWP of $80-$100 million.

On average, organisations cover 50% of their maximum probable loss in property, plant and equipment, but they insure only 12% of probable maximum loss in information assets.

Mr Steingold’s third key recommendation is to push to privatise risks held by governments “where it makes sense”.

He says governments are struggling financially and the question is whether they should take on “growing risks”.

Mr Steingold says since 1989 an estimated 86 “gigalosses” – corporate liability settlements above $US1 billion ($1.42 billion) – have occurred, including events such as the Deepwater Horizon oil spill.

He says data and analytics hold the keys to success this decade.

Insurers may have opened the door to alternative capital by creating a commodity – especially catastrophe risk – and if it is so easy to quantify risk and poach underwriting talent, then it is very easy to pair it with capital and “take all of us out of the equation”.

Mr Steingold says insurers should expect to see new players and peers as data-based companies seek to expand their product offerings.

The industry can also expect to see new channels and new alternative capital paired with managing general agency fronts and wholesalers.

And he warns reinsurers are entering the insurance space, as are bankers, hedge funds and Google.