Tag: risk

The impact of Covid-19 on the insurance sector

The outbreak of the Covid-19 pandemic has had a huge and devastating impact across the world with its ramifications starting to be discerned across various sectors such as health, finance and aviation. This has threatened the global supply chain which resulted in an economic stall.

The insurance industry has not been spared with new questions arising as the crisis unfolds. Stakeholders want to understand the business’ exposure to the virus as well as what the future holds for the insurance market.

As an MSc Actuarial Management student, joining a student society and hosting events that impact the professional sector I am training has added a lot of value to my studying experience. As Co-President of the Actuarial, Insurance, Risk and Quants Society (AIR-Q), it was an honour to work on the ‘Impact of COVID-19 on the insurance sector’ webinar. The session was AIR-Q Society’s take on investigating and tackling these issues. The event’s keynote speakers, Mr Michael Tripp, Mr Dimitrios Velmachos and Mr Asif John, gave their thoughts on the implications of the pandemic to the UK insurance market, risk management techniques and the future of data analytics in modelling insurance products. The speakers also addressed any questions posed by the attendees based on their vast knowledge and experience in insurance. The event was hosted and moderated by one of our society Co-presidents, David Flanigan.

Why Covid-19 is not a ‘black swan’

This question was initiated by Mr Velmachos, an entrepreneur and insurance executive by profession. He highlighted that the black swan notion was brought about by the theories discussed by Nassim Taleb in his book, ‘The Black Swan: The Impact of the Highly Improbable’.

The notion was based on the similarities between Covid-19 and author’s definition of a black swan.

According to the definition: First, nothing in the past can convincingly point to its possibility. Second, it carries an extreme ‘impact.’ Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.

Dimitrios explained that the pandemic does not fully satisfy the properties of a black swan. In fact, many warned the pandemic would happen, including influential people like Bill Gates who clearly stated that the world was not ready for the next pandemic.

With such discussions setting the mood for the forum, the speakers then delved into the insurance world by giving presentations on how various classes of insurance have been impacted in the UK.

Impact on general insurance

Mr Tripp’s discussion focused on the impact of Covid-19 on general insurance segments. As a general insurance actuary working at Mazars UK, Michael stated that actions taken by the government to curb the spread of the virus has resulted in a myriad of general insurance claims. For instance, several corporations have been counting their losses following regulations by the government to close business providing non-essential services. As a result, there has been an increase in business interruption claims prompting insurers to review their policy wordings.

Michael further stated that travel insurance business has also experienced an influx of claims due to cancellation of flights after many states issued travel bans. This argument was also backed up by Mr Asif John, an actuary by profession and founder of ARGenesis consultancy, who emphasised that many travel insurance policies did not exclude coronavirus from cover. Hence, insurers are expected to settle any claim that may arise from these policies.

John highlighted that classes such as commercial liability lines and credit insurance are likely to encounter significant losses in the long haul. For example, a number of health workers have taken to legal action against the NHS claiming negligence by the government in ensuring that personal protective equipment was delivered on time, thereby endangering their lives.

Nonetheless, some general insurance lines have had better claim experience since the pandemic emerged in late 2019 as pointed out by both Michael and John. Classic examples include motor insurance and household contents whereby fewer claims have been reported due to the imposed lockdown. This move by the government resulted in many individuals normalising working from home, thereby leading to a significant reduction in the use of vehicles. With fewer cars on our roads, there have been fewer accidents occurring.

There has also been a reduction in theft leading to fewer burglary claims reported. However, Michael also brought out the fact that the lockdown has also resulted in companies relying on IT systems to deliver value to their clients. As such, there might be an increase in claims relating to cyber risk in the future, and insurers should thus tighten their policy wordings on this cover.

Impact on life and health insurance

The impact on both life and health insurance seems to go hand in hand due to the short timeframe between diagnosis and death. This has led to an increase in both the morbidity and mortality experiences as highlighted by John. The country’s health insurance sector is thus facing losses as a result of the high number of coronavirus cases. The dramatic reduction of health workers available to attend to other serious cases such as cancer will exacerbate future morbidity experience.

Besides the significant impact on mortality, Michael also pointed out that the shock experienced in the financial markets will also impact life insurance companies. This stems from the fact that they have long term liabilities and as such tend to hold long term assets. Extreme market volatility will negatively impact both the income and capital on these assets such as equity, thereby creating tremendous asset-liability management risks.

Data analysis as a tool for risk management

Being an AI and data science specialist, Asif stressed the importance of data analytics to the current situation, in particular, areas which actuaries should start focusing on. Adoption of data techniques through the use of advanced models will, therefore, succour in eliminating data issues at the input stage leading to credible forecasting.

Analysis of data at a granular level is also key for insurance companies as highlighted by Dimitrios. Granularity helps in properly understanding the data thus making aggregation of datasets into different segments easier. Better risk management techniques may also be identified as a result of having detailed data as risks will be classified and assessed homogenously.

Dimitrios also touched on the importance of incorporating epidemiological features in the modelling process in order to expand the dimensions of the output. This will help in analysing the worst-case scenario hence help in pricing and reserving and proper risk management.

What does the future hold for insurers?

Insurers need to seize some of the opportunities arising out of this crisis. It is clear that the traditional distribution channels have been disrupted indicating the need for accelerated digital transformation. Process optimisation is inevitable for insurers as working from home has become the new norm. The introduction of additional covers such as telemedicine will also be a boost to the insurance penetration in the future.

Thank you!

Being part of AIR-Q has been an incredible addition to my master’s experience: I have gained much deeper knowledge of the actuarial field, networked and built many new friendships. Myself and my fellow Co-Presidents of AIR-Q Society (Rocio Plasencia, Juan Sebastian De La Torre, Evangelos Santas,  Adam Upenieks, David Flanigan and Peter Vodička) would like to thank the speakers, attendees and the Business School’s events team for making this webinar a success. Special thanks also go to Leon Cuthbertson from the events team for assisting with the event. We’d always like to hear your thoughts, so follow us on LinkedIn or  Instagram!

Lucy Nondi, MSc Actuarial Management (2020)

Meet Cass AIR-Q Society’s Presidents of 2019/20

I am Peter Vodicka, PhD Candidate at Cass and Founder of Cass AIR-Q Society – the Cass Actuarial, Insurance, Risk and Quants Society. We are focused on bringing together students with like-minded interests, the society organises meetups, workshops and networking events allowing students to immerse themselves in the actuarial, insurance, risk and quantitative finance industries.

The Society is made up of five Co-Presidents: one undergraduate student and four master’s students. I spoke to our Co-Presidents and asked them about their time at Cass so far and their plans for AIR-Q. Meet the Co-Presidents:

Rocio Plasencia, MSc Insurance and Risk Management (2020) from Peru

I decided to study at Cass to continue my personal and professional development. Cass is not only providing me the appropriate tools to improve my skills and to progress my expertise and vision in insurance business, but also it is giving me the opportunity to get to know the worldwide leading insurance market. I have met incredible and inspiring people from all over the world. I am looking forward to all our future events at Cass AIR-Q Society.

As a Peruvian lawyer, the diversity of the modules on the MSc Insurance and Risk Management can be a big challenge, but it was one of the main reasons I chose this master’s. What I love the most about the insurance industry is the possibility of getting to know people with different perspectives and professions.

As one of the Presidents of the Cass AIR-Q Society, my objective is to contribute to the society becoming a reference point and a source of knowledge at Cass and in the industry by hosting specialised workshops and seminars.

Lucy Nondi, MSc Actuarial Management (2020) from Kenya

Located at the hub of UK’s capital, Cass attracts a blend of cultures from all over the world. This has been one of its outstanding attributes, on top of the quality of education it provides in the fields of finance and business. My first three months have been very exciting as I have been able to attend various events that have helped sharpen both my networking skills and clarify my career path.

Joining Cass AIR-Q as one of the Presidents provides a great platform for interacting and learning from different professionals who are already in the finance field. I will therefore be able to keep up to date with what is currently happening in the industry through the networking events are planning for in the new year. Cass AIR-Q will also be an opportunity for me to improve my networking skills that is really essential in my career goal as an actuary.

Evangelos Santas, MSc Financial Mathematics (2020), from Greece

Being a postgraduate student in the heart of the financial capital and being in contact with world-leading finance leaders, every day here at Cass just feels so amazing. The professional environment have made me feel back in my element and comfortable. The many helpful people I work with every day made me quickly forget about London’s rainy weather. It’s a great way to entry in the world of business!

Coming from a university in a different country, I had to face with a completely different study culture. Understanding how to approach my finance classes, as I come from a quantitative background, were challenging but incredibly rewarding.

Joining AIR-Q Society as one of its Presidents has been a great opportunity to give back to the Cass community. I’ve had the chance to meet interesting people, to learn about the industry’s current trends and to develop my organisational and communication skills by preparing interesting events, focusing on quants master’s students.

Adam Upenieks, MSc Quantitative Finance (2020), from Canada

 

Walking through the doors for the first time, I noticed that Cass is more than just a place to learn. It is a place to meet people, gain connections and learn about your peers. The atmosphere of Cass and the energy of London has made it a great place to train for a career in finance.

The biggest challenge of any graduate programme is time management. It is a crucial part of being a successful student and an invaluable skill to have for a successful career. Currently, I am balancing my time between studying for my CFA level II, taking extra-curricular Python courses, and studying a full course load at Cass. This is a challenge, but I wouldn’t have it any other way!

Being part of AIR-Q presents you with opportunities to gain invaluable knowledge through meeting industry professionals and networking. It is also a fantastic opportunity to create tailored events for our peers in the quantitative disciplines. As a President, you need to have your finger on the pulse of what is happening in the world of finance, what is interesting to your peers and to organise remarkable events. My goal this year is to bring meaningful information to my peers in the world of quantitative finance, so that we can all learn and move forward together.

Juan Sebastián de la Torre, MSc Insurance and Risk Management (2020), from Ecuador

Joining Cass and AIR-Q has been amazing and I’m enjoying every moment. The campus facilities are excellent— you have access to every resource you need for your research and studies. The master’s programme encourages you to give your best and reach your potential.

Finding a balance between studies, social life and hobbies is a must. At the moment my modules have been amazing providing me with a lot of knowledge and that encourages me to seek for more information and always be investigating about new trends in the insurance market.

I decided to run for Cass AIR-Q President because I’m passionate about the field I’m studying and it is a great opportunity to provide my classmates and Cass students with great opportunities to assist to workshops, discussions panels and events organized by the society with interesting and experienced workers in the field. My goal with Cass AIR-Q is to provide quality events that will benefit the students and increase the society group members.

Follow AIR-Q Society on LinkedIn

David Flanigan, BSc Actuarial Science (2020), from the United Kingdom

I am in my final year of BSc Actuarial Science and have benefited hugely by making the most of the resources and facilities offered by Cass and would urge new students to do the same!

As well as my role as President of AIR-Q, I am also President of the undergraduate Society of Actuaries and hope to establish a strong link between master’s students and our undergraduate students who may be looking for mentors or advice.  Collectively, we can recognise the benefits expanding our networks to draw on our peers’ expertise.

Studying MSc Insurance and Risk Management at Cass: the Khatib legacy

Reem El Khatib

Prior to my bachelor’s degree in psychology, my father would sit me down and talk to me about the insurance industry’s potential, hoping that one day I would follow his path and that of his brothers. I was, however, fixated on a certain perception that stopped me from delving deeper into this misunderstood field. Upon finishing my bachelor’s, I soon realised that despite my passion for psychology, it was not the right career for me. By that time, I had lost my father and my main source of guidance and advice. I struggled to find a new passion that would give me the same excitement and thrill as that from psychology.

I am lucky enough to come from a family that looks out for each other. Although I lost my father, I had another father figure in my life that I looked up to, my uncle, Wael El Khatib, the Chairman of Lockton MENA. My uncle completed his MSc in Insurance and Risk Management at Cass in 1998. Upon completing his degree, he had unknowingly begun a legacy for the Khatibs to follow. Years later, my cousin, Ata El Khatib, followed in his father’s footsteps and also completed his MSc in Insurance and Risk Management at Cass in 2008. Ata is currently Deputy CEO at Lockton MENA.

I think by now you know where this is heading… Ata was not the last Khatib at Cass.  His brother, Faris, also joined Cass in 2012 and completed the same master’s degree. Faris is currently the head of Employee Benefits at Lockton MENA. Obviously, the list continues… In 2016, Zainab, their sister, also joined Cass. Zainab had a similar background to mine where, despite her bachelor’s in linguistics, she decided to venture into the world of insurance. She joined Liberty Specialty Markets in London, around two years ago, in an underwriting assistant role for the Strategic Assets team.

During my phase of confusion, Zainab spent hours talking to me about the beauty of the insurance industry. She described it as “the field that offers you something new every day, the field that challenges your analytical abilities and forces you to think about the unthinkable.” She helped me overcome the misconceptions and helped me acquire a clearer vision of what I wanted. That’s how the fifth member of the Khatib family joined Cass, as I am currently doing my MSc in Insurance and Risk Management.

Faris, Ata and Wael El Khatib

If it wasn’t for my uncle, I wouldn’t be where I am at right now. He encouraged me to join Cass and supported me in every way. They all told me about the strength of Cass’s education system, their remarkable memories at Cass and the unbreakable friendships that they developed. Hence, I knew that Cass was the place to be. There was always a common story that I heard, a story that described my family’s respect towards our professor, Chris Parsons. Professor Parsons managed to teach every member of my family. In the span of 20 years, he met the father, the sons, the daughter and the niece! Which is crazy if you think about it…

Zainab Khatib’s graduation

I am currently creating my own Cass experience, which so far has been indescribable. Not only have I acquired a new family that is so diverse and caring, I am discovering a world that I had no idea existed. Although I am leaning more towards Risk Management at this point, I am enjoying every aspect of the programme. I can’t deny it, it can be challenging sometimes, but I am definitely receiving the appropriate support and knowledge from my professors to help me overcome the obstacles. It is safe to say that my vision of what I want to do after my master’s is becoming clearer. But for the time being, I am planning to take my time in developing this vision. Every day I am learning something new, every day I am falling in love with a different aspect of this field. But, I am sure that Cass will eventually direct me towards establishing my vision.

 

Reem El-Khatib, MSc Insurance and Risk Management (2019)

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