¶ Intro / Opening
🎵 Music
¶ Introduction to QBE Re and Nick Hankin
I'm Mark Gagan and you're listening to the Voice of Insurance podcast, produced in association with Advantage Go, now part of Sapiens, enabling an enterprise view of exposure. Today's guest is running a global reinsurer with bold ambitions to double in size over the next five years. Nick Hankin is Managing Director of QBE Re.
Now into his fourth decade in the industry. Nick has market experience in abundance. So when, despite the recent, relatively rapid softening of the reinsurance market at the most recent renewals, he says he still sees plenty of opportunity for profitable growth. We should sit up and take notice. This is a podcast full of purpose and positivity. Nick has a clear plan that he wants to execute and makes a convincing case that his ambitions are eminently achievable.
On the way, we cover all the major issues of the day, including the insurance and reinsurance opportunities arising from the data center boom, the best use cases for AI, as well as the emergence of AI as a new casualty peril in its own right. Nick is good company and a great communicator with a clear vision. The next half hour will fly by. Enjoy the podcast. Nick, welcome to the Voice of Insurance.
Hello, Mark. It's great to be here talking to you today.
Anyone out there who doesn't know you, can you just briefly introduce yourself, run us through your career and why don't you start with how you got into insurance and reinsurance?
Yeah, well this is the thirty first year that I've been in insurance and reinshorts, Mark. So I started as a graduate trainee at Royal Sun Alliance.
So this is where everyone starts? Yeah.
A number of different insurers, Axa, Zurich, AIG, Aviva and I joined QBE in twenty twenty. So I joined in a group role, I then moved into the International Division as a chief underwriting officer. And that included being the chief under officer for our reinsurance business, QB Ree. I've done quite a lot of work, I guess, across the industry. So I've worked with Paul Ree. I was the chair of Climate Wise for a period. And I'm also currently the commercial chair of the ABI commercial committee.
Climate wise. That's a UK industry initiative, wasn't it? It was from about fifteen years ago. Yeah, for about fifteen years. But it's still going, yeah.
Still going, yeah, to the basic um help manage the transition to a lower carbon economy.
So you're right up to date. Why don't you give us a bit of a sense of scale?'Cause QB's such a big business. And it's not always easy to break out the reinsurance because i there are different divisions, but there's not a specific reinsurance division. Can you give anyone listening a sense of the scale of QB Re as an entity if it were a standalone entity?
¶ QBE Re's Global Scale and Vision
Yeah, absolutely. So I was very fortunate to become the managing director of QB Re on January the first. QB Re is our global reinsurance business. So it's a business that's tripled in size in the last six years. It's now three billion dollars. It has a truly global footprint. We have a team of around a hundred and fifty.
But we're obviously part of the international division, part of QBE. So we've got a massive amount of internal advocacy and support in terms of driving the growth of that business.
And where would you say that your headquarters?
Well, we've got a London base, but we're also in Bermuda, we're in Brussels, we're in Dublin, we're in Dubai and North America. So we've got a truly global business there working with a lot of our global clients. We have three global products. So property caching and specialty, and we run those through three PLs: Europe and Growth Markets, North America, and our international PL.
You're relatively new in this position. Should we expect to see any change of emphasis between you and your predecessors?
Well, I think their strategy is really clear, Mark. So we want to double the business in the next five years. So take us to around six billion dollar business. We continue to recruit and develop the team and the capabilities to do that. The priority for me, I think, really is around continuity.
It's about stability. It's really about partnership with our clients, building on that expertise, responsiveness. I'm very focused on underwriting expertise and skill and that accountability, but also that ability to make decisions close to the market, close to clients.
So there's a lot of continuity and that's really what our clients and our partners tell us that they value in QBUE. And I also want to make sure that we continue to focus on investing in the business. So modernizing it, the technology and the tools to help our underwriting teams particularly make those decisions.
What's the driver of that ambition? Obviously, no one ever does anything just because or just for the sake of it. Is it because do you feel that scale is required?
Well, I think we have scale. Yeah. But I think what's exciting is we've just got the chance to be a truly relevant global business to our clients. So kind of probably about 70% of our clients are in that global key client range. So sophisticated buyers of reinsurance looking for multi-year partnerships. also looking for a partner who's able to assemble different products.
different treaties across different jurisdictions and different products and take a holistic view in terms of the way that we can actually work together and support them in developing their business. Yeah. So I think QB R probably came from a relatively small base five or six years ago.
It's now a really relevant reinsurer. We think we can double the business to six billion. We could probably become a top 15 reinsurer. And I think that makes us a really meaningful part of QB as a group, but it also makes us really meaningful to our clients.
So you want to be sort of on that team sheet when you know those reinsurance managers, those boards from Sedents are thinking about their reinsurance, you want them to think Right, well yes, QB needs to be part of this because they're here. They're going to be here and they're going to support us and they're the sort of people that we want to stay reinsured with.
Yeah, it's a long term view, it's consistency, it's predictability. And it's also we want to have that curiosity where we really understand those organizations. We understand where they're growing, we understand where they're looking to do in terms of developing their portfolio and their reinsurance solutions and then be part of that for the long term.
So is it relatively high service model in that sense? Because you need to spend that time with the client that the client knows that you know them. And actually, when I was listening back to the last podcast with Chris Kalury, your predecessor, it was part of that strategy was very much, you know, our stated aim is to be a real partner type reinsurer. We're looking for a deeper, broader relationship with the right seedant.
And then obviously as they grow, we'll grow and they'll grow profitably, therefore we'll grow profitably, we'll value them, they'll value us, and we will have that kind of partnership. And Is that still very much the strategy? Do you think a lot of that growth is gonna come from the fact that you have these good partnerships? You're just gonna make them better partnerships, broader partnerships, that perhaps if they were single class you can make them broader, cross class.
whole account or whatever, and then you get the growth that way without having to go and find thousands of new clients.
Yeah, I think that's certainly an element of it. I mean, I think we want to have a number of different areas that we can pursue to drive growth. So you would look at new products, you look at different jurisdictions, look at adjacencies to what we already do well today. But I think to pick up your point around those global clients, I think if you just look at the economics, we believe those clients will be
¶ Client Partnerships and Growth Strategy
very successful organizations in the future. So in the next three, five, ten years. So we expect them to grow. We therefore then also see an opportunity for us to maintain and grow our a share of the reinsurance participation with them and so if you put those two things together we will end up with a materially bigger business in that time frame.
And I suppose yes, if you go from three to six, it's not as if you're straining the market because uh you could be given a bigger share on every treaty that you write, effectively today without it worrying those security committees, for example.
example. I think that's absolutely true. I mean we've got a very strong balance sheet and capital strength was again our clients' value. But to pick up your point around the client understanding, the way that our model has been designed is to have a, I think, a very healthy leadership conversation between people who've got responsibilities for global products.
people who've got responsibility for regional P and L's, but also then leaders who are looking at just from a client perspective and a partner perspective. And then we've got really strong capability on pricing, portfolio management, analytics, developing those tools for the underwriter. So I think bringing all of that together
create a truly global business. And one of the things that I'm doing, which I think is building on a lot of philosophy that Chris put in place is to create that one team ethos.
Yeah.
So for that to really to be of value to our clients, we need people to be able to make decisions that in isolation they may say, well, they're marginal, but that when they look at it from a client perspective, it actually makes a lot of sense and shows up in value both for the client and for QBA.
And also you mentioned about adjacent adding more capabilities into different lines and those kind of understandings. So is that generally the philosophy again to be doing all the things that if your seedn
your preferred sedents and those preferred clients are in a particular class, then presumably you you want to be in that class. If you're not, you want to add that capability so that you can broaden that relationship so that, you know, if they're in this line and you're not currently in this line, you think, well, this would be a very good thing to add. That's basically another way of describing it that
Do you become more of a generalist? And I wouldn't qualify that, though'cause generous might sound like you're not very good at anything, because you just do a bit of everything. But of course that's not the case, i.e. generalist in the sense that you have a specialism in it pretty much every specialism that there is, and you add them all together, it means you do everything.
Yeah, I think I start from the point of view that you need really amazing capabilities. So if you're going to add credit or you're going to add mortgage or you're going to add structured reinsurance, then we basically look to build fantastic expertise and if we've got that or we hire that to complement what we've already got in property, casualty and specialty.
But I think you don't have to do everything for every client. So again, those organizations are large enough that if you've got a really fantastic relationship, you can have a very transparent conversation around what they're looking for, what your appetite is, what you can do and participate. But the key thing
is not to provide surprises. So the key thing is that kind of year in, you're out consistency, uh, we're not changing, we're financially strong, we're with you for the long term. And just finding solutions that work for both parties.
I suppose d things like your cat appetite changing from one season to the next it can be very painful when they have that expectation. Well I thought I kind of counted on your fifteen percent and it turns out I don't have that anymore or that's now become five and I'm in a bit of a pickle.
Yeah, and I think it's having the empathy for the person on the other side of the desk, isn't it, for the reinsurance buy and I've done that role so I understand that those teams are looking to provide solutions for their business CEOs and MDs who are trying to grow it.
letting them down, aren't you, in front of their own board? That's not what you want to do.
Yeah, absolutely. So it's really important to me.
¶ Market Softening and Underwriting Discipline
Obviously talking about surprises, I talked to some people on the reinsurance side of the desk after the one one renewals, now after one four renewals. Some have expressed a certain amount of surprise that the market softened as fast as it did. Some described it as say, Hey, we've got two years of softening and one, I was surprised.
I go every year to Monte Carlo. We must meet up at Monte Carlo if you're there. And uh I do a documentary style podcast where I talk to lots and lots of people. I talk to slightly too many people actually, but do a massive canvas of the market. And of course every reinsurer last year, twenty twenty five, Monte Carlo was saying, Yeah, you know, we've done really well. We'd like to do a bit more.
More capital, we've got our appetites kind of back, our emojis back, we're all here, and rate adequacy is here. And now, obviously, you have a surprise. People like surprises when they're good surprises. And in the financial world we absolutely know that no one likes negative surprises. So we've we've had this negative surprise. Does that affect your appetite in any way? Does it make you more cautious?
Or you're still looking at them thinking, you know, the adequacy is still there and we need to press forward and of course you still want to grow, presumably you grow knowing what you're growing into.
I think your last couple of sentences absolutely mirror my sentiment really in that we anticipate a lot of that softening market.
It could not happen, could it? I mean we all done bit of economic
We've run economics and so we anticipate that when we set the plans. We've anticipated that as also when we've set the trajectory for the growth of the business. I'm still really ambitious for the business, I'm still really ambitious for the growth opportunities, but it's supported by a really clear focus on underwriting discipline and the right tools and understanding the economics of each particular deal and each particular arrangement.
So the imperative to earn a decent return on the capital that we're provided doesn't go away. That's a really important deliverable that I and the QB V business need to deliver. But the strategy is really unchanged. What I was talking about in terms of those global and key clients, I think are the clients that we believe are best positioned to succeed through a cycle.
They have the most diversified portfolios and the softening is not equal in every single product line and the softening is not equal in every bit of the jurisdiction. So I think the trick for us and the test really of any kind of strategy or any successful business is can you be successful in different market conditions? And we're still very confident on that growth trajectory that I outlined at the start of our conversation.
Yeah, and I suppose in the grand scheme of things, yes, it's not market destabilizing, is it, necessarily, particularly over that sort of period, again, it's not impossible to do.
It's only possible to do and again it's the important thing is about making sure that it's a really sustainable market. So I think what both parties want is that the pricing is adequate, the terms and conditions make sense, and that actually those products and services are going to be there for customers. year in year out. So I think there's a mutual interest to have an orderly, but it's still a highly competitive market as it should be. There's a lot of appetite
We're still happy generally with the rate adequacy.
Yeah, we're still happy with the way adequacy.
And also on the TNCs, terms and conditions are not eroding. Obviously we know this period of excellent profitability we've had in the reinsurance market has been not wholly, but say the fundamental shift was to increase the retention levels of seedants worldwide. Obviously increase the price of the product ultimately, but at the same time
Certainly uh decrease the share that reinsurers were taking of those attritional losses, which obviously are hitting all of us. It's not as if they've gone away. We look at the aggregate numbers that come out every year, over a hundred billion every year, and it doesn't seem like it's ever going to go down from there. That's our base level now, isn't it? So they're not being eroded, would you say?
No, they're not. And I think there's a lot of value both parties to having the right attachment levels and I think moving the market away from being just too transactional. You know, I just don't think that is a particularly good place for everyone to be.
Yeah, and the right sort of buyers know exactly what they're buying. They're buying the bigger stuff and the really volatile stuff. That's what they're paying to take away. That's what your job is.
And if they're bothering you with small things all the time, again their deductibles are too low, isn't it? And I suppose they would understand that you're supposed to be saving up for a really rainy day if every time there's a little bit of drizzle they come to you, it doesn't seem to make much sense. I would think of that from a buyer's perspective.
I think that's absolutely the case. And again, I think particularly those global and key clients really understand that dynamic.
¶ Leveraging Alternative Capital and ILS
Another thing that's been a big feature of the last few years has been the way that the ILS market, the alternative capital market, has really held up. It's now growing, it's hitting record levels you've been engaging.
First of all, you've got a casualty sidecar. Really interesting to hear about that, obviously,'cause QBE, certainly on the insurance and reinsurance side, always been known as a a casualty market uh within the market, particularly in the London market and international casualty space, always. So run us through that.
So I think Marl the strategically a big focus of us is really about portfolio mix and portfolio optimisation. So I'm having to think about what's the right mix for QBE between property, casualty, specialty, uh any other particular portfolio that we put into the mix. How's that fit with an international mix? How's it fit with a target mix for QBE?
So one of the opportunities I think we saw with the Scicar was allowing third party investors to participate in a defined portion, particularly of our casualty portfolio. So it's a quota share arrangement. It gives us additional capacity. What it enables us to do is really provide positive outcomes for our clients.
So I want us to be in a position where we can say yes to clients if they need more support on casualty or if they're growing a particular line, even if it's potentially meaning we're a bit overweight on a particular product at a particular time. So that's very important as a tool for us to balance the portfolio mix, give stability. I think it's another really good evidence point of the confidence that people have in the quality of our portfolio.
And we did it as a first one for the twenty twenty five underwriting year. It's certainly something that we would look to do to pursue in the future and build those long term relationships with some of those investors.
Also Cat Bond, but I suppose you've been in that market for perhaps a bit longer as well.
Also looked at cat bonds, yeah. I think again there's a opportunity there potentially.
But in terms of the last time that we had the ILS market really humming along and very confident and full of capital, hitting record issuance and record outstanding.
Let's say around twenty thirteen, twenty fourteen, it was a time when perhaps the traditional reinsurance market was looking upon it perhaps more of a threat and thinking, wow, this is actually a different source of capital that has a different cost of capital and has a different return hurdle from us and this is slightly destabilizing, but also
if there is cheaper capital out there then it would be silly of us not to engage with it and put some of it in our pocket and lower our own cost of capital by using it. What's your view on that? And For one, it's not ten years ago, it's not twelve years ago that capital we'd all have to argue that we get more sophisticated all the time'cause we're learning our lessons all the time. There are new lessons to learn, of course, and the world changes.
But we do hopefully get better at solving yesterday's problems than we were. So do you well, for one, we don't view a burgeoning ILS market as being something that might destabilise the market. And also engaging with that is again a interesting strategy. It's difficult to know. I would say the ILS market, twelve years ago there were sort of markets that some people would say were potentially naive.
These days, one would presume that they will learn their lessons or that they are more sophisticated than they used to be.
Yeah, I would say that we have to think about looking at all these different avenues to help us support our clients through different market conditions. So
If we come back to our earlier conversation, what we don't want to do is just in a softening cycle just have to withdraw capacity and withdraw products and services and just say, Well, it doesn't meet our hurdle rate, so we just cannot support you. And so we have to look at the retro market, we have to look at sidecars and third party capital to help us manage our net exposure and manage our profitability and performance through a cycle.
So I think we had a good result. You know, we're very pleased with the result that we had with the casuality sidecar and we are working with those partners again, similar to the way we think of our clients, make it sustainable and a good outcome for them in in the long term.
let's say your own seed and seed more, you seed more, does it just make more sense? You reduce your own volatility.
I think it's partly that as you're looking to grow, although we've got really clear plans about where we think that growth will come from, whether it's from a customer type or product type, whether it's from a part of a a certain region, as you are executing plans, inevitably different opportunities present themselves. And so sometimes that changes your portfolio profile or your volatility profile or your capital profile. And you just need to have
as many tools and techniques as you can to manage that so that you can make quick decisions and capitalise opportunities that present you. And that way I think for us, Mark, it's very important to have the internal advocacy within QBE. So the fact that Chris Gloria has now become our group chief financial officer.
the fact we've got so much support from the Group Exec and from the International Executive Board means that we've got the right capabilities internally to help us manage our portfolio mix and our volatilities and the capital requirements to grow the business.
I suppose if you just boil it down to the fundamentals of underwriting, you want to say yes to all the good stuff. So if you've got some very good stuff being offered to you, you want to say yes. Sometimes you need the tools behind you to be able to allow you to say yes with great conviction and put that line down.
Yeah, we have a very simple business model. We effectively have a very good understanding of our client mix. We have a really clear view on which products we want to be in on a global basis. And we have these three regional P and L. So all of those have slightly different
characteristics and slightly different requirements. And our job is to knit all of that together for a successful outcome for the clients and to deliver the business. And it's really important to me, Mark, that the business delivers the overall top and bottom line result. So one of the things that I reinforce all the time with my team is that even in our most successful years, we will have parts of the portfolio that underperform.
Some products are underperformed, some geographies are underperformed, but ultimately we have to be accountable to deliver that overall outcome and deliver the growth potential that's beyond us. So all of those tools and techniques are just things to help us manage our way through that overall objective.
Yeah, I suppose when you hit six billion, I presume, and you look at the theoretical composition of that six billion, it theoretically should be a less volatile proposition than a three billion today, one presumes,'cause it should be more diversified, more balanced.
I agree with that. And also remember we're part of the international division. So the international division is an eleven billion dollar division of which QB R is three billion. So again, we run that as a single business unit effectively. So we get some diversification benefit there as well.
In terms of this market, what's your feeling at the moment about where it's heading? So the softening seems to be continuing. How far does it have to go before you start to feel that you need to walk away or at least lighten the load a little bit and not increase lines and or start reducing line sizes, for example?
Yeah, so strategy is really long term and it's around partnership. We look at portfolio performance, we look at incentives, we do really have a focus on if we have underperformance. And as I said, we want to make sure that we're meeting or or exceeding our cost of capital. But I think we've got the ability to have so much diversification against product and client and geography that we can actually manage it. quite comfortably in the market conditions that we're trading in currently.
Where are things good at the moment in terms of where the growth's coming from? You've got this worldwide purview. Where are you most happy the opportunities that you're seeing in terms of pure growth?
¶ Identifying New Growth Markets and Products
I've probably categorised them as for us it's potentially some new product areas. So credit, mortgage. We also have a life reinsurance business. I see growth in all of those areas within our specialty portfolio. I think we've still got some growth areas in areas like A and H. We're seeing more inquiries and opportunities on structured reinsurance.
There is our whole account quota shares, particularly in in North America. I think for our business, we were historically underweight in North America. We've certainly grown that business more significantly. We're now over a billion dollars. in QB Re in North America. But again, we've still got some growth potential there. Geographically, we also can grow more in Asia.
So we've just recently opened our operation in Singapore. Again, we think there'll be further opportunities in Asia, supporting and tying in with our insurance operation. QBE's been in in Asia for a long time. And then finally again we come back to that client strategy. And we've made really good progress in being relevant for those top clients, those global clients, the top 10, 12 clients. But we think there'll be a lot of organic growth of them over the next five years.
From more generic questions to really specific ones. There's been a lot of excitement the last six months, particularly when it's really sort of hit everyone's front pages.
¶ Data Center Boom: Reinsurance Opportunity
The data center boom, there's a huge amount of investments going in. It looks like one of these situations where the whole market has to come together where it's we're going to require all the capacity of everybody to agree, or well, most of it.
as an opportunity, you know, we're talking about very large facilities, huge amount of investment, starting with construction. Are you starting to see some of that demand come through? And it's a sort of thing you're penciling in thinking, Well I mean how do you view it as an opportunity?'Cause obviously No opportunity comes without it being a problem to be solved. Obviously some of these facilities are so enormous that they're bigger than most individual sedans.
Yeah, they're a long way from the old office risks that we used to ensure. I suppose they're a good example of why there's so much growth potentially in the reinsurance market as the investment in these sort of capabilities grows exponentially and the solutions need really good collaboration between the broking market, the insurance market and the reinsurance market to provide
enough capacity and enough reinsurance support to provide some solutions. So yeah, we're doing a lot of work currently within QBE in terms of the way that we join up the proposition for data centers and join up the thinking between insurance business and the reinsurance business to come back with solutions for clients.
So it's something that you're starting to actually see some of these things coming across the desk and they've got reasonably big numbers attached to them, haven't they?
They haven't and we've thought about the way that we organise ourselves in QBE to best respond to those, as I think as a number of different brokers have also thought about that.
I always think, yes, the thing about technology of course is that you sort of you would needed one of these data centers the size of many multiple football pitches or whatever. Of course, now that would fit into your telephone. And yeah, I always wonder, yeah, will the tech evolve so fast that we can shrink the size of those data centers down to, you know, small box? I yeah, the opportunity won't be around forever, but it's certainly it's around today.
Yeah, and I think it's also about where's the risk sharing between the investors and the owners of those data centers and the insurance and reinsurance market, because I think that will find its equilibrium over time.
Obviously what's driving these data centers is the boom in AI. Yeah. Well, I've been talking about AI on the podcast for at least two years now. And I suppose the line of question has to move on from sort of, hey, what are you experimenting with to sort of what have you experimented with and what's worked?
Where you found that you're not going to be able to it's the most useful and where you're really keen to be fully implementing something and really pushing the accelerator on it and saying, Right, I know this works and I'm really happy to start implementing this, obviously with all the right guardrails and everything else and controls, but where are you kind of thinking, right? Within the reinsurance business, as a reinsurer, where does the AI make the most sense to be fully implemented?
Yeah, I think for us it's a real great enabler for pace, efficiency, and helping our teams just do more.
¶ AI's Transformative Role in Reinsurance
If you think about that global business at three billion, going to grow to six billion, it's still quite a small team. And it's also got a team with fantastic expertise that we want to be focused on, the most impactful. pieces of work. So either internally or or particularly out with clients and building those relationships. So I think for me, we're looking at how do we use AI to give us better insights into the sort of services that we need to provide our clients.
I think we are starting to use AI to process unstructured data, so to help us with some of the underwriting assessment. And we're giving our team more self-service tools. So things around MI, the way they can actually interact with their portfolio and their underwriting process, we're using that to help them deliver that. But what we've done on AI as part of our modernization program is everything's linked back to the objectives and the key results of the business.
So everything is linked back to what are we actually trying to do in terms of delivering the growth or delivering a better experience for our people. or just delivering a better way of actually understanding the data that's coming through from our seed and partners, but particularly that ability to use AI to fully link up everything that we're doing for clients.
We're very disciplined in the way that we think about every client engagement and the notes that we write following those meetings. And then actually just having AIs and ability to join that up just gives a global team the ability to actually keep on top of everything that's going on and what we're supporting our clients.
So is it more about productivity? I'm sure, you know, everyone in senior management would love to get to that six billion target and keep the same number of employees and just double the turnover and profit per head would be wonderful. I mean you're bound to have to hire a few more people to get there, but Is it really more about productivity versus improving underwriting skill at this stage?
I think it's probably a bit of both. So I would absolutely expect to grow the size of the team as we double the business. But those hires are really around targeted expertise and capability. So we think a lot of that AI will be able to do a lot of that kind of operational support, which is important from a productivity point of view. But I actually think
the bigger win for us or bigger opportunity will it be about insights and tools and just accelerating the way that we think about the sort of the portfolio composition and different solutions. So actually very additive to the on-white decision making process and additive to the portfolio process.
I suppose it has to come in the right order, doesn't it? Obviously you want to move all the the employees sort of higher up the food chain into greater value added tasks and you don't really want pay people to, you know, to be manually re entering and reformatting things and just trying to get their head around what this submission is.
And put it in a way that you can understand it and start to analyze it. I suppose once that's being done, of course, then you can start to use the AI to do the clever stuff, but you need to get the AI to get the house in order in the first place, so you can then do the next stage. I suppose it it does come in a logical order and I suppose
It's perfectly understandable that you've got to get the first bit right, otherwise the second bit won't work. Because you'd be using the wrong data or you comparing apples with oranges and all the other things that you might do.
Yeah, I think you've always got to conform your data and you've got to have those sort of underlying systems. We're ensuring that we have the same common technology platform across the whole of QBE re globally. That will make a really big difference. So I think it's a combination of both. There's a lot you can push forward on that's more innovative at the same time you're doing foundational work, but I think your characterization is correct.
Yeah, and supposed it'd be very nice to low on and look at something and then the AI might say, Do you know actually somebody in North America's written something really similar to this and here's some of the working they did at that point. Do you want to have a look at it?'Cause it's it might give you an interesting flavour of How to look at this new risk you've just been shown over here. And there's so many really great things that you could do.
I think that's the key win for us because if you'd probably gone back to that business I described that had tripled in six years ago, it would have been quite siloed by product or biography. We're now a truly global business. And so a lot of that join up is being done through technology, but it's also been done through leadership and people making sure they're sharing and on calls. And I think the AI will just help us.
to consolidate all those insights, whether or not product insight, underlying insight, claims insight, or a client insight, and then give people the access to do that to help them be more impactful with their clients.
No, that's really good, isn't it?'Cause you can't go back to the old days when not everybody knew what everyone else was doing and and you know, I am the experience of that when I was a broker, you know, odd anomalous situations of Global Reinsurer with a Norwegian office ended up doing Spanish business to me when their local office had already declined it three times.
Weird things.
¶ AI as an Emerging Casualty Risk
Uh one would hope that that will never happen again. What about AI? Now putting your casualty reinsurer hat on. How do you view AI as a risk in itself, as a new ENO, an emerging tech ENO risk? And well we don't quite know what other type of risk it might be, but it's obviously a tech ENO risk.
if it goes off and sort of, you know, whatever Mickey Mouse did in Fantasia in the uh sorceress apprentice, well he made his broom go and collect the water for him and then he they all multiplied and then it all got terribly out of control and then luckily the sorcerer woke up from his nap and everything was okay. But We know that AI has that capability, that sort of systemic capability.
to get things wrong. What's your view from a casualty perspective, from casualty reinsurance perspective? Obviously, there are a lot of people out there now in the startup insure tech type world are looking to be the first insurers of AI.
Partly it's sometimes it's almost like an enterprise risk of almost the efficacy of that AI as well, which is something that's generally a red flag for insurers to say, well we don't usually want to tread there. But again, this is a new world, why not? What's your view on it anyway? And do you think it might end up being a standalone class?
Yeah, well I think it's certainly as of today is a risk amplifier if only because of the scale of
It will make the error worse.
The scale, the speed, I guess, of the technological change, the fact that it could drive correlated losses or systemic risk. It's gonna be quite challenging in terms of attribution, in terms of causation. We probably don't think of it at the moment as like to be a standalone line.
So probably embedded similar to the way that cyber used to be thought about. And I think over time, as it matures, we may end up with clearer definitions, even potentially exclusionary language coming out. But at the moment, say we don't see it as being a standalone.
We're not there yet. I suppose it if load of losses suddenly started manifesting themselves and we could see what the a new problem that we hadn't for the most likely thing with AI or like with everything is we know that there's gonna be unforeseeable things that happen. We know enough, but we just can't foresee them, can we? So If we could, we could exclude them now. But but what's happened with cyber is you end up with when there was particular things around cyber war and property damage.
Specifically related language. At the moment, obviously, this is a silently included coverage in all liability insurance. It's not because it's not.
It's a similar dynamics, doesn't it? A cyber, which was silent and then more affirmative covers and then separate products and it went on that evolution. I feel it's a little bit early to say whether AI will follow that same pattern, but at the moment we would just see it as an amplifier to the existing product.
We're already probably all using AI so much already that it becomes an impossibility to exclude. You just have to say, Well, this is just the world now. Well I was thinking about an example saying, Well, you can't really exclude telephones. From liability. It's like it's just everyone uses a telephone.
It just becomes another mischaracteristic, another thing you have to assess, another thing you have to price, another thing you have to manage from an exposure perspective.
And you need to understand and and you wanna know what sort of AR they're using, what they're using it for and how they're using where the garb rails are. I suppose, you know, the other questions in the proposal form, but probably it won't be a a form form, it's gonna be, you know, in your online interrogation of these Risks, I suppose new data that you'll learn, these are the new data points you're gonna want to know.
data, you'll be looking at way how organizations are thinking of it from a risk management perspective, you're looking at whether there's different exposures by different trade sectors. I think all of those things will evolve and mature along with the technology.
But you're not necessarily losing any sleep right now.
¶ Episode Conclusion and Future Engagement
Well Nate, I've really enjoyed talking to you. Good luck on your journey. So that I I think that obviously means we have to book in a time certainly in a year or a year and a half or two years time sort of check in on how you're getting on how the market is then and how QBE re is within that. Until then. Thanks so much for talking to me and I've really enjoyed chatting to you.
Thank you, Mark. Really appreciate the opportunity.
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