2020 NAI C I NSURANCE SUM M I T - III · 2020. 9. 8. · 2020 NAI C I NSURANCE SUM M I T NAIC 2020...

2 0 2 0 N A I C I N S U R A N C E S U M M I T

NAIC 2020 Insurance Summit Financial Keynote Presentation

Sean Kevelighan

Chief Executive Officer

September 8, 2020

Insurance Information Institute 110 William Street New York, NY 10038 [email protected] 212.346.5520 www.iii.org

2 0 2 0 N A I C I N S U R A N C E S U M M I T2

The Triple-I & Its Mission

2

A world with MORE insuranceWe are the trusted source of unique,

data-driven insights on insurance…

……to inform and empower

consumers.

2


The Disruption Continuum

INSURANCE

Catastrophes COVID Economics

Geopolitical Social Unrest Technology


Capital Protections

Community Well-being

How Insurance Defines Success

Economic Growth

Resilience


Fairness & Equality

A New Milestone for Measuring Success

Capital Protections

Community Well-being

Economic Growth

Resilience


How Insurance Drives Economic Growth

Safety/Security

Insurers are financial first responders

Economic/Financial Stability

Development

Insurers are risk mitigators

Insurers are capital protectors

Insurers are credit facilitators

Insurance sustains the supply chain

Insuranceis a partner in social policy

Insurers are capital infusers

Insurers are community builders

Insurance enables infrastructure improvements

Insurers are innovation catalysts

1

2

3

5

4

6

7

9

8

10


Insurance & Economic Leadership

1AM Best and FDIC; 2PC 360, Insurance Industry Crisis; 3U.S. Bureau of Economic Analysis, 2020; 4U.S. Department of Commerce, 2020; 5Federal Reserve, 2019; 62011–2014, Insurance Industry Charitable Foundation – amount donated so far to fight Covid-19.

$630B 3.0%US GDP3

Premium Taxes Paid4 $23.6B

Muni Bond Investment5 $500B

Charity/Volunteerism6 $280M

2.8M Employed

Need to Fill

400K+ by 20222

2010

Bank Failures: 157

Insurance Impairments1: 4

Policyholder Surplus:

~$772B

Economic Growth Promoter/Facilitator

Strong Jobs Pool/ Provider

SustainableBusiness Model

End Q1/20

http://www.propertycasualty360.com/2013/04/17/insurance-industry-crisis-400000-positions-to-fill?slreturn=1476304299


Stepping Up

Customers Community Employees Industry

Auto insurers have returned $14 billion so

far to customers' pockets around the

country through premium relief

Insurers have pledged more than an estimated

$280 million (according to III/Insurance Industry

Charitable Foundation) in donations to the national and local organizations

fighting this pandemic on the frontlines

Employing more than 2.8 million Americans, Insurers are taking care

of their employees–many pledging no layoffs during the

ongoing crisis

Insurers are implementing

innovative solutions to carrying out daily

operations while respecting social

distancing

America's Insurers:

for Customers, Communities, and Employees

The insurance Industry is Applying Forward-thinking Solutions to Take Care of Its Customers, Communities, and Employees During the COVID-19 Crisis

2 0 2 0 N A I C I N S U R A N C E S U M M I T2 0 2 0 N A I C I N S U R A N C E S U M M I T

Underwriting Trends


COVID-19’s Impact

Unprecedented Spread of Loss, Deterioration of Exposure

Source: Willis Towers Watson, Insurance Information Institute..

Exposure Impact

Investment

$14B auto premium

Employment related exposures (GL, WC)

Volatile stocks, bond yields plunging

Lloyd’s estimate: $96B in investment losses

Potential Loss Impact

2.0

0.6

0.3

0.7

0.2

22.7

4.0

2.6

27.0

1.7

0.8

92.0

0 20 40 60 80 100

BI

D&O

EPLI

GL

Mortgage

Political risk,credit, surety

WorkersCompensation

Billions of US$

Loss estimates range from $30B(≈ bad hurricane) to $140B (2-3 Katrinas)

11

Industry Outlook

99%

102%

99% 99%0%

7% 6%

-5%

0%

5%

10%

15%

94%

96%

98%

100%

102%

104%

106%

2015 2016 2017 2018 2019 2020 E 2021 F 2022 F

Pre

miu

m G

row

th

Co

mb

ined

Rati

o

Combined Ratio DWP Growth NWP Growth

Commercial Lines Rate Change

Growth in Nominal GDP (Real GDP + Inflation)

Calendar Year Written Premium and Net Combined Ratio Projections

Data sources: NAIC data sourced through S&P Global Market Intelligence, MarketScout, Blue Chip Economic Indicators, Congressional Budget Office, PCS, Aon, Munich Re, Energy Information Agency, FRED (Federal Reserve Bank of St. Louis).

Analysis: Insurance Information Institute, Milliman.

4.8%

-20%

-10%

0%

10%

20%

20

03:Q

4

20

04:Q

3

20

05:Q

2

20

06:Q

1

20

06:Q

4

20

07:Q

3

20

08:Q

2

20

09:Q

1

20

09:Q

4

20

10:Q

3

20

11:Q

2

20

12:Q

1

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12:Q

4

20

13:Q

3

20

14:Q

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20

15:Q

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20

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3

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17:Q

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18:Q

1

20

18:Q

4

20

19:Q

3

20

20:Q

2% C

hg

fro

m Y

r P

rio

r

-4.3%

5.5%5.3%

-6%

-3%

0%

3%

6%

20

16

20

17

20

18

20

19

20

20E

20

21F

20

22F

% C

hg

fro

m Y

r P

rio

r

2020 Commentary

Overall premium projected to be flat. Underwriting result deteriorates.

• Pandemic and recession reduce exposure in personal auto, several

commercial lines.

• Rate increases make up for lower exposures somewhat.

• Tremendous uncertainty due to pandemic’s impact on several lines.

• We assume normal cat year, despite bleak hurricane forecast.


4138

80

111

51

24

8

1980s:$5 B

1990s: $15 B2000s: $25 B 2010s: $35 B

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

$110

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20*

$ B

illi

on

s, 2

01

9

Average for Decade

Hurricane Andrew

U.S. Inflation-Adjusted Insured Cat Losses

*Aon estimate through April. 2010s is average of 2010 to 2019. All losses are Direct.

Sources: Property Claims Service, a Verisk Analytics business; Aon; Insurance Information Institute.

Harvey, Irma, Maria

2019 Was a Relatively Mild Year; 2020 Faces Pandemic, Above-average Hurricane Forecast

WTC

Katrina, Rita, Wilma


Hurricane Forecast

Grim

Source: Colorado State University Tropical Meteorology Project.

16

8

4

19

9

4

20

9

4

24

12

5

12.1

6.4

2.7

0

5

10

15

20

25

30

Named Storms Hurricanes Major Hurricanes

April Forecast June Forecast July Forecast August Forecast 1981-2020 Average


Commercial Lines Rate Changes

Sources: Willis Towers Watson, MarketScout, Marsh.

MarketScout

4.5%Willis

6%

Marsh

14%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%2

01

3:Q

1

201

3:Q

2

201

3:Q

3

201

3:Q

4

201

4:Q

1

201

4:Q

2

201

4:Q

3

201

4:Q

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201

5:Q

1

201

5:Q

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201

5:Q

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201

5:Q

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201

6:Q

1

201

6:Q

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201

6:Q

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6:Q

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7:Q

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201

7:Q

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8:Q

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201

9:Q

1

201

9:Q

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9:Q

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201

9:Q

4

202

0:Q

1

Rates Have Been Rising. Is It A Hard Market?


Commercial Rate Changes

By Line, as of Second Quarter

Source: MarketScout.

3.5%3.0%

2.5%2.0%

3.0%2.5%

6.0%

-1.5%

2.5%2.0%

1.5%

5.0%

6.0%

4.6% 4.6% 4.3%

3.0%

5.3%

0.0%

6.7%

9.3%

5.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

Property BusinessInterrupt

BOP InlandMarine

GL Umb/Excess

CommAuto

WC ProfLiab

D&O EPLI

2019 2020


Financial Trends


Key Sources of P/C Insurer Profits

Through first quarter.

Data are before taxes and exclude extraordinary items.

Source: NAIC data, sourced from S&P Global Market Intelligence.

$4.0

$14.6 $14.1 $14.6

$20.2

$14.5$16.8

$13.6 $14.9 $15.3 $14.7 $14.6

-$2.2 -$1.2-$4.2

$0.1

$5.0

$2.8

$4.6

$2.9$0.0

$4.1 $5.3 $6.3

-$10

$0

$10

$20

$30

09 10 11 12 13 14 15 16 17 18 19 20

Net investment gains

Underwriting gains/losses

$ Billions

Steady Investment Gains, Good Underwriting Results Lifted Profits in Most Years


463

848

772

830

$400

$500

$600

$700

$800

$900

09:Q

2

09:Q

4

10:Q

2

10:Q

4

11:Q

2

11:Q

4

12:Q

2

12:Q

4

13:Q

2

13:Q

4

14:Q

2

14:Q

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15:Q

2

15:Q

4

16:Q

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17:Q

2

17:Q

4

18:Q

2

18:Q

4

19:Q

2

19:Q

4

20:Q

2E

18

Policyholder Surplus by Quarter

Sources: ISO, A.M. Best, Insurance Information Institute.

-9%

8%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

16:Q

2

16:Q

3

16:Q

4

17:Q

1

17:Q

2

17:Q

3

17:Q

4

18:Q

1

18:Q

2

18:Q

3

18:Q

4

19:Q

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19:Q

2

19:Q

3

19:Q

4

20:Q

1

20:Q

2E

Surplus Has Rebounded from Q1 Decline Caused by Unrealized Capital Losses (Stock Declines). 78 Cents of Premium per Dollar of Surplus.

Change from Prior QuarterAmount of Surplus ($ Billions)


4.85

3.353.02

0%

1%

2%

3%

4%

5%

6%0

2

03

04

05

06

07

08

09

10

11

12

13

14

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19:Q

1

19:Q

2

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4

20:Q

1

P/C Insurer Portfolio Yields, 2002–2020:Q1

Sources: NAIC data, sourced from S&P Global Market Intelligence; Insurance Information Institute.

P/C Carrier Yields Have Been Falling for Over a Decade, Reflecting the Long

Downtrend in Prevailing Interest Rates.

Even if Rates Rise in the Next Few Years, Portfolio Yields Are Unlikely to Rise Quickly Since Low Yields of Recent Years Are “Baked In” to Future Returns.


Interest Rates Tumbled, Will Recover Slowly

Sources: Federal Reserve Economic Data (FRED); Blue Chip Economic Indicators (8/20); Insurance Information Institute.

2.3%

1.4%

0.7%

1.3%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

2019:Q2 2019:Q3 2019:Q4 2020:Q1 2020:Q2 2020:Q3E 2020:Q4E 2021:Q1E 2021:Q2E 2021:Q3E 2021:Q4E

Median

Bottom 10 Avg.

Top 10 Avg.

The Forecasts in the Blue Chip Survey See a Common Direction for the Yield of 10-year T-bonds in 2020–21 But Not Much Relief.

(10-Year Treasury Yield)


Employment in Major Subsectors of the Insurance Industry: A Surprise

Over the Last Two Years, All Four Major Insurance Industry Subsectors Have Grown Employment Despite the Recession That Began in February 2020

Data are seasonally adjusted

Sources: BLS; Triple-I

535.0

553.8

561.1

344.3

349.3

352.9

535.3

579.2

582.3

825.0

837.2

844.5

0 500 1,000 1,500 2,000 2,500

End of 2018:Q2

End of 2019:Q2

End of 2020:Q2

P/C Carriers Life Carriers Health Carriers Agents/Brokers

2,340.8

2,319.5

2,238.9

Thousands


COVID-19

Economic and Cultural Impacts:An Industry’s Response


Global Pandemics Are Uninsurable

Economic Impact of 9/11


Global Pandemics Are Uninsurable

Economic Impact of Coronavirus


Adopting and Adapting: Workarounds in the Workflow

Zoom Meetings

RestaurantTake Out

StayingHome

Social Distancing


Regardless of Scenario, Retroactive Attempts to Include Pandemics in BI Causes Bankruptcy

Monthly Costs of Retroactive Changes to SME BI Policies

Median estimates are model-driven. The higher and lower estimates assume a standard distribution for BI losses anchored in the mode-driven median loss estimates.

Key Assumptions

Scenario 1: 40% take-up rate

Scenario 2: 100% take-up rate

Loss basis: Compensation, profits, adjustment costs 7 days waiting period

Retained loss of 10% of total loss

125

250

380

50

100

150

0 50 100 150 200 250 300 350 400

Monthly Range ($B)

Higher

Median

Lower

Higher

Median

Lower

Virus / Bacteria Exclusion Removal

Expanded BI toAll SMEs

1

2

Retroactive BI Scenarios


The Surge in Business Interruption Media Coverage Created an Opportunity for Triple-I to Serve as Industry Voice and Educator

Source: Meltwater

Count of Stories Mentioning Business Interruption Insurance & COVID-19

834

7,730 7,610

6,910

3,180

5,000

4,210

February March April May June July August


With Increased Attention and Scrutiny on Industry, Triple-I Identified the Need to Launch an Industry Campaign

The ‘Future of American Insurance & Reinsurance’ campaign launched in May and has served as a source of education and information surrounding pivotal industry activity, including Congressional hearings,White House roundtables, state legislation, and media stories.

With a separate website and public presences, this campaign provides the Triple-I with a separate platform and voice.

The campaign will take on overarching industry issues and emphasize its essential role in supporting and rebuilding communities in these uncertain times.

www.fairinsure.org


Six Months into COVID-19, News Coverage Continues to Shine Light on Growing Need for a Federal Policy Solution

Number of Stories

Source: Meltwater

0

200

400

600

800

1,000

1,200

1,400

1,600

5/14-5/20 5/21-5/27 5/28-6/3 6/4-6/10 6/11-6/17 6/18-6/24 6/25-7/1 7/2-7/8 7/9-7/15 7/16-7/22 7/23-7/29 7/30-8/5 8/6-8/12 8/13-8/19

BI & Lawsuits BI & Federal Action


FAIR Guiding Principles:A Defined Perspective on Potential Policy Solutions

Given their universal scope, pandemics are largely uninsurable. Therefore, only the government has the financial capacity to provide the relief

small and large businesses need to weather this crisis.

Proposed solutions must:

Maintain the federal government as a primary provider of relief, reflecting the reality that pandemic risks are not privately insurable.

Provide widely accessible relief payments to businesses in a fast and efficient manner once a pandemic is declared by the government, with minimal chance of abuse.

Protect businesses from losses, and incentivize businesses to retain employees, without jeopardizing insurers' existing commitments.

Summer 2020

An initiative of the

32

Drive behavioral change to help people and communities better manage risk and become more resilient

Objective

33

Create a resilience movement giving households and communities a stake in risk mitigation

Educate and empower stakeholders about protection gaps and their impact on their recovery

Fast-track the use of cost effective tools to drive risk mitigation, transfer and retention

Strategies

34

Five by 2025

Success Metrics

1. Quantify, track and improve resilience ratings for 50 cities

2. Connect 5,000 decision-makers

3. Bring-to-market 5 resilience tools

4. Change how 50,000 businesses and households manage risk

5. Integrate risk mitigation into 5% of residential and commercial policies

Action Partners

35

Triple-I Members

Carriers, Reinsurers and Brokers

Insurance Trade Associations

Non-Profits and Foundations

Regulators

Academia

36

Toolkit

Hubs, Blog, and Updates

Ratings Tracker

Media Outreach and Rapid Response

Virtual Townhalls

Lightning Rounds

Insurance Programs

Scholars and Fellows


Fairness and Equality


Fairness and Equality:

In the Workplace


Employed Persons by Occupation, Sex, Race, andHispanic or Latino Ethnicity, 2019

Source: Bureau of Labor Statistics

OccupationTotal

Employed(in 000s)

% of Total Employed

WomenBlack or African

AmericanAsian

Hispanic or Latino

Total, 16 Years and Over 157,538 47.0% 12.3% 6.5% 17.6%

Business and Financial Operations Occupations 7,996 54.0% 9.9% 9.0% 9.5%

Insurance Sales Agents 595 50.6% 10.1% 5.6% 13.4%

Claims Adjusters, Appraisers, Examiners, and Investigators

318 62.1% 19.5% 4.4% 9.5%

Insurance Claims and Policy Processing Clerks 269 81.7% 21.8% 2.4% 15.5%

Insurance Underwriters 105 51.1% 5.9% 5.4% 6.2%

Actuaries 33 N/A N/A N/A N/A

The Industry is More Diverse and Inclusive Than It Was 20 Years Ago, But Women, People of Color and Other Minority Groups Are Still Significantly Underrepresented at Senior Levels


African-Americans Are Particularly Under-represented

Source: Source: Marsh, Journey of African American Insurance Professionals, 2018

70%Agreed or

Strongly

Agreed

that there are

greater obstacles

for African

Americans

compared with

other minorities

There Are Greater Obstacles for African Americans in the Insurance Industry Compared to Those for Other Minorities

or Under-represented Groups

38%

32%

13%

11%

6%

Strongly Agree

Somewhat Agree

Neutral

Somewhat Disagree

Strongly Disagree


Key Barriers for Minorities in Insurance

Lack of exposure

Lack of networks

Lack of experience

Racial bias

Gender bias

Lack of educational preparation

Source: Marsh, Journey of African American Insurance Professionals, 2018


The Higher Up One Goes the Less Diverse It Gets

Source: Independent Insurance Agents Study, 2018

Two percent of established agencies have at least one African American principal

Four percent of independent agencies have an African American Principal or Senior Manager


Fairer Outcomesfor All


Solutions?

The NAIC's newly formed committee on race and insurance will address practices that potentially disadvantage minorities – the industry will engage with the NAIC to review the recommended steps

SOLUTION


Where Do We Go from Here?

Sources: P/C 360, D&I study: Issues, opportunities for women in insurance, May 28, 2020

Without targets that are clearly articulated around initiatives and strategies,

it’s hard to conceive that diversity, equity or inclusion will really be achieved

– Dr. Leroy D. Nunery II, Founder and Principal, PlusUltré LLC


Final Thoughts


Insurers Are Financially Sound and Have the Resources* to Keep America Resilient

Despite setbacks due to

COVID-19, the insurance industry

stands ready to live up to its

promises to keep households,

communities and the American

economy more secure, productive

and stronger.

*See COVID-19 “Final Thought”


It Takes a Movement to Build a Stronger, More Resilient America

Greater catastrophe risks demand greater

mitigation and resilience tools to reduce loss of

lives and money. The Resilience Accelerator

and its partners advance this cause by building

a Resilience Movement to empower all.


Commitment to Creating and Empowering Structure to Ensure Diversity and Inclusion at All Levels

Diversity and inclusion in our industry won’t just

“happen.” We’ve made organic gains in the 21st

century and are creating new structures by

devoting energy and resources necessary to

make the insurance industry a leader in

breaking down barriers and building truly

inclusive workforce.


COVID-19 is Beyond the Scope of Insurers/Reinsurers

Senator Ben Nelson (D-NE)


Working in Tandem to Overcome Unprecedented Challenges

The insurance industry is proud of its

continued success in these areas—in

large part because this success is built

on a foundation of working in close

partnership with consumers and

regulators


Thank you!

www.iii.org

Informed. Empowered.

2020 NAI C I NSURANCE SUM M I T - III · 2020. 9. 8. · 2020 NAI C I NSURANCE SUM M I T NAIC 2020...

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Transcript of 2020 NAI C I NSURANCE SUM M I T - III · 2020. 9. 8. · 2020 NAI C I NSURANCE SUM M I T NAIC 2020...