Broking 2020 - PwC

Broking 2020:

Leading from the front in a new era of risk

Protecting against a new breed of emerging risks requires co-ordination across corporations, insurance companies and policymakers. Insurance brokers are ideally placed to lead this `risk facilitation'. But as the pace of change within the marketplace accelerates, a major rethink of how they operate and compete is likely to be needed.

insurance

About the research

The findings within this report are based on an in-depth survey of risk buyers (typically Heads of Risk or CFOs) from multinational corporations. The participants bring together a range of sectors and company sizes. In addition, we undertook face-to-face interviews with Steve Hearn, Deputy CEO of the Willis Group, Daniel S. Glaser, President and Chief Executive Officer of Marsh & McLennan Companies, and Dominic Christian, Executive Chairman of Aon Benfield International.

2 | Broking 2020: Leading from the front in a new era of risk

Contents

Introduction: A new era

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Insurance 2020: Future of insurance

1

1. Forces transforming the risk landscape

2

2. Consultative broking demands broader information

gathering, insight and collaboration

8

3. Stepping up to the demands of a new world

14

Conclusion: Out in front

19

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Introduction: A new era

We're pleased to introduce Broking 2020: Leading from the front in a new era of risk.

The world is facing an increasingly complex, uncertain and, in some important areas, under-insured risk environment. For example, climatic and geopolitical instability are making once unthinkable losses seem almost commonplace as illustrated in Figure 1, which highlights the sharp rise in average catastrophe losses since the 1970s.

Looking at past responses to shifts in the risk environment, Figure 2 outlines significant claims that have affected industry practices in recent decades. Figure 3 highlights the potentially dangerous economic impact by revealing the growing gap between insured and uninsured losses.

USD Billions 22222222222222111111111111111111111111111111000000000000009999999999999999999999999999991111000000000099999999998888888888777777777732109876543210987654321098765432109870654321

Figure 1: Globaall ccaattaassttrroopphheeininssuurereddlolosssees--s--11997700toto22001133 150

120

90

60

30

0 Source: Guy Carpenter Global Catastrophe Review 2013

Natural

Man made

10-year moving average

i | Broking 2020: Leading from the front in a new era of risk

Figure 2: Significant claims that affected industry practices

1970's: Flixborough Vapour Cloud: Revamped petrochemical coverage and protection

Source: PwC analysis

1980's: Deering Milliken Carpet Factory Loss: Revamped property coverage and highly protected risk (HPR) specifications

1980's?90's: Asbestos Class Action Suits: Revamped product liability limits and created new structure for coverage

2001 9/11: Impacted across the coverage spectrum with $44 billion in losses

2011 Thai Floods: Highlighted and redirected approach to supply chain risks

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In USD bn, at 2013 prices

400

Insured losses Uninsured losses 10-year average insured losses 10-year average total economic losses 300

200

100

0

Economic loss = insured + uninsured losses SSoouurrccee:: SSwwiissss RRee SEcigomnoamic Research & Consulting

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