He said on a panel at Insurance Insider’s London Market Conference: “What we are now starting to see is systems that are able to do things better at the complex end than we can as human underwriters.
“The market has always prided itself on underwriting expertise, and that tradition has always been a human skill.”
Cox noted that data and analytics were beginning to “park their tanks on our underwriting lawn”, adding later in the panel that the London market’s “sweet spot” was complex risk.
“The bar for complex risk underwriting is going up as we use data and technology in different ways to help us gain new insights into underwriting, risk selection and pricing,” he continued.
Although Cox believes this presents a big challenge for the market, it could also be a big opportunity if embraced correctly.
Munich Re Syndicate CUO Dominick Hoare said the market needed to be careful with data and technology, which often looked “backwards”, while the market must continue to look forward to be successful.
During a separate discussion at the conference, Hiscox CEO Bronek Masojada argued that digital placements had “saved the market” during the pandemic.
Inflation: A self-fulfilling prophecy
Regarding ongoing uncertainty on inflation, Sean McGovern, Axa XL’s CEO for the UK and Lloyd’s, observed that uncertainty could be priced easily with a well-informed view of risk.
The problem, he pointed out, was that there were questions in the market about “what the informed view of risk is”, particularly with property cat.
Cox explained that the market was used to pricing for uncertainty, as long as it knew the uncertainties for which it was pricing. He added that the biggest driver of inflation was the expectation of inflation – “it really is a self-fulfilling prophecy”.
The Beazley CEO noted that rate increases were decelerating where loss activity was going down and “people are confident in the playbook”, but rate increases were ongoing where losses continued.
He suggested the market was a bit more diffident with pricing in areas where they were worried the playbook was completely “bust”.
Cox added that climate change had thrown a “big spanner” into the cat playbook, and social inflation had thrown a bit of a spanner into the liability playbook.
On inflation, Howden CEO Andy Bragoli said that while his clients saw pricing as being important, “what’s more important for them is being able to get capacity”.
AIG’s global head of multinational Elke Vagenende pointed out that the most important thing for clients [above inflation] was that the market could provide sustainable solutions.
“And we need to price realistically so we can actually provide that solution,” she said. “Competition for clients goes beyond rate today, and conversations with clients have grown up a lot.”
The war for talent was also discussed during the panel, with LEK Consulting’s Justin Balcombe stating it was the most significant issue facing the London market today.
Despite the challenges, there was a sense of optimism about the future of the market across the panel.
McGovern explained: “We’ve been through a pretty challenging period. If we take Lloyd’s as a bellwether for the London market, Lloyd’s looks like it’s going to post a profit for the first time since 2016.
“The fundaments of London market are sound, there is capacity coming into the market. We shouldn’t be too hard on ourselves – we are very active and very creative.”
