It’s been just over a year since global reinsurer Gallagher Re started trading in South Africa, taking over from Willis Re in the local market. We spoke to Natalie van de Coolwijk, the company’s regional director for the Middle East & Africa, about Gallagher Re’s first year in SA and asked her to make some predictions for the next 12 months.
The move to Gallagher Re has certainly been an exciting one for us, especially on the back of such a significant reset in the reinsurance industry.
We have ambitious plans, and to deliver on those it is not only critical that we maintain our relevance but also enhance our offering to keep up with the evolving needs of our clients. Thanks to the willingness of Gallagher Re to invest, not only have we been able to expand our local team and presence but also our offering. One such example is our proprietary flood analytics offering for South Africa, which we launched during 2022.
It couldn’t have come at a more appropriate time against the backdrop of the tragic KZN floods, which served as a stark reminder for the need for more robust risk quantification and mitigation methodologies.
This approach resonates with the wider focus at Gallagher Re, where there is a strong emphasis to invest internally and externally in building solutions that target all forms of risk, including emerging risk. For example, we are looking more closely into CESG risk and its components: physical, transition and liability risk. Each of these risks plays a crucial role within the broader CESG story, and the time to deliver innovative solutions addressing these risks is now.
We also look at the bigger picture and play an active role in bringing together all relevant stakeholders – financial institutions (insurance, asset managers, real estate, banking), governmental entities, academia, and emergency management – to identify risk and implement actionable plans to improve resilience, mitigation, and adaptation readiness. An example of our efforts on this front is our public private sector initiative, which has led to the establishment of government supported natural catastrophe pools (to cover insured and uninsured citizens) in Morocco and Algeria. At present we are actively involved in a number of comparable projects and hope to witness the rollout of additional pools in the future.
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The main challenge is how the reinsurance industry balances the continued effects of inflation, social inflation, elevated supply costs, and other variables today and in the future. There will inevitably be market adjustments to ensure solvency for the broader industry and individual companies as the quest for affordable capital takes on more urgency. The risks and costs associated with litigation and liability will only become more pronounced if more steps are not taken to add more protections for the industry and its consumers.
Climate change a major risk
The overarching near- and long-term risk will inevitably come in the form of climate change. Scientific consensus continues to show how the behaviour of weather and
climate-related events are growing more intense and, with some perils more frequent. While most current focus is on the physical risk aspect to climate change, the impacts extend well beyond whether or not an event leads to direct damage.
The non-physical piece of climate risk can feature losses from business interruption or costs associated with transitioning away from a fossil-fuel-driven balance sheet. The reputational risk from doing the bare minimum is also an important metric to keep in mind. With a rapidly evolving regulatory environment and an increasing push for climate-related disclosures, there are growing mandates that will push global and regional insurers to take better account of how future climate scenarios will affect their bottom lines. Solvency is key. Rating agencies are also beginning to score how financial institutions are implementing CESG into their business operations. There will inevitably be new variables that test how we handle the increased cost of natural catastrophes. Inflation is the biggest challenge today. How we implement our lessons learned from today’s environment will be critical to how we handle the next hurdle tomorrow.
Our aim is to be the fit-for-future reinsurance broker – with our strong focus on service delivery and comprehensive analytics and the transactional capabilities and access to worldwide markets to back it up, we want to help our clients secure optimum terms, boost their business performance and make them more resilient in the face of future challenges.