Beazley’s Cox: “What if” risk scenarios topping CEO concerns in volatile times
Beazley CEO Adrian Cox has warned his peers they need to get used to dealing with the unexpected as an increasing number of “what if?” scenarios become reality.
In an interview with The Insurer TV he reveals the major loss events of the past few years - such as the Covid-19 pandemic and the Russian-Ukraine conflict, demonstrated an increase in volatility across the risk landscape.
“Where we see increases in volatility, we have to make adjustments to the margin so that the return on capital remains adequate,” he said.
Cox said Beazley was increasingly focused on analysing in depth what unexpected events could impact the company, and what the impact of those events would be,
“This is because the "What if?" seems strangely more likely than it did five or ten years ago and we have to prepare for that,” he added.
Indeed, the last few years have presented a number of “curveballs” that weren’t really expected, including the pandemic and the ongoing war in Ukraine.
Cox said the macroeconomic landscape also presents challenges - while the risks it presents are not new, many of the consequences are being seen on a scale not previously experienced.
“I've been talking to investors quite a lot since I took on this role in April 2021 and we describe the environment as high risk-high reward,” he said.
“We are in an era where markets have changed and hardened and reacted to changing conditions and changing losses, and I think we are in a marketplace that allows us to price correctly for exposures that we have, but they are elevated at the moment - and they're elevated pretty much whichever way you look.”
Cox said risks such as inflation, geopolitical risks and climate change were all “heightened” at the moment, “so, it's difficult to pick which one we're most concerned about”.
“When we look at pretty much all the products we have, they are facing heightened risks. Some will likely persist longer than others and we have to behave accordingly. But we live in volatile times, where unexpected things happen quite suddenly and that's another thing that we've had to get used to.”
Elevated risk leading to increased collaboration
While this prolonged period of elevated risk has raised questions over the insurability of certain perils as well as the affordability of coverage, Cox said the industry is continuing to innovate to deliver solutions to meet these challenges.
A recent example of this is the Ukraine grain and food product export facility, established last July.
“We did obviously adjust to conditions in and around Ukraine to make sure that our downside risk was contained, but broadly speaking, we wanted to carry on with business as usual. In addition to that, we’re part of the coterie of insurers that continue to insure grain coming out of Ukraine and it’s important,” he said.
Cox is enthused by what Beazley and some of its peers are doing in the market to address these types of challenges. “I think we’re thinking far more collaboratively as a marketplace,” he said.
In terms of where the market could direct more of its efforts, Cox says it should be doing more on enabling the transition to a low carbon world.
“I'm convinced that insurance has a role to play in that and do more to de-risk this,” he said. “We should be able to understand climate change and the impact that it has on assets.
“I don't think insurance is the first thing people think of when they plan to transition, either as a municipality or as a business, but we should be. And I'd like us to see if we can be at the center of thinking about how to transition and the role that we can play as I'm convinced there are lots of products that we can design that will be genuinely helpful,” he concluded.
To watch the full 25-minute interview, click on the video at the top of this article to view or listen to Adrian Cox on:
- How to make the most of a $350mn capital raise in the current market conditions
- The impact of the $45mn cyber cat bond on Beazley’s portfolio
- The macroeconomic factors keeping Adrian up at night
- How to approach leadership as the CEO of Beazley
- His outlook for 2023 and beyond