Lloyd’s is set to get into Canada’s cannabis market when recreational marijuana becomes legal there on Oct. 17, according to Hank Watkins, president of Lloyd’s America Inc.
Watkins was speaking today at the 2018 Insurance Forum, an annual event in Southern California hosted by the Center for Insurance Studies, part of the Mihaylo College of Business and Economics at Cal State University Fullerton.
The center regularly hosts speakers to bring together the insurance community. Past speakers include California Insurance Commissioner Dave Jones, actor Arnold Schwarzenegger, and Robert Hartwig, former economist and president of the Insurance Information Institute.
Watkins, who was outlining global opportunities and risks for the crowd of insurance professionals, educators and students, also talked about Lloyd’s City Risk Index, which measures the economic risk faced by 279 cities across the world from 22 threats in five categories: finance; economics and trade; geopolitics and security; health and humanity; natural catastrophe and climate; and technology and space.
Those listed in the index are some of the world’s leading cities, collectively generating 41 percent of global GDP.
Watkins pointed out that many of the emerging risks today are not the same risks people had to worry about 20 years ago.
“More of the threats are manmade than natural,” he said, referring to threats like cyber and market crash.
Watkins also highlighted opportunities for the industry, including insuring the cannabis market in Canada.
Lloyd’s pulled out of the U.S. medical marijuana market in 2015 largely due to the federal government’s stance that cannabis is to be considered a Schedule I drug under the Controlled Substances Act.
Following his talk at the forum, Watkins was asked to elaborate on what Lloyd’s may be doing in Canada’s cannabis market. He said that no official announcement has been made, but that Lloyd’s appointed brokers are already preparing to offer products for the cannabis industry.
“We’re just going to do it,” he said.
James Lynch, chief actuary and vice president of research and information for the Insurance Information Institute, gave a state of the industry rundown.
Lynch said the U.S. property/casualty industry saw net income of $34.5 billion last year in the face of numerous catastrophes.
Hurricanes Maria and Harvey struck in 2017, while California experienced record wildfires, some of which are being blamed on more severe weather being driven by climate change.
“It seems like these things are accelerating,” Lynch said.
He also pointed out that the industry has great opportunity to come in and fill the world’s massive insurance gap.
According to him, there were roughly $1.3 trillion in assets between 2005 and 2015 that were uninsured that could have been insured.
Resilience in the face of a warming world was a theme several speakers touched on, including Sophie Evans, a programme director with Willis Towers Watson.
Evans talked about the need to find more innovative ways to encourage people to build more resilient and to take up insurance.
“We need to do a better job at rewarding resilience,” she said.
Her list of innovations that the industry should consider embracing inclulded parametric products, which do not indemnify the pure loss but make payments upon the occurrence of a triggering event.
One such product was launched on Tuesday by Jumpstart Insurance Solutions Inc., a licensed surplus lines insurance broker using Lloyd’s capacity that will offer earthquake insurance in California with payments linked to a formula and based on U.S. Geological Survey earthquake measurements.
Christopher Borders, an advisor for Jumpstart, was a speaker at the forum. He was on a panel that addressed resilience in the face of disasters with Tina Kirby, head of innovation for Beazley.
Borders said the Jumpstart product is designed in particular to help low to middle income families faced with fleeing from their communities following devastating events rather than rebuilding because they cannot afford insurance.
For around a $20 per month premium people can get a roughly $10,000 set benefit for a triggering event. Actual premiums vary by ZIP code.
Borders said that for people with modest incomes that payout may be enough to help them survive and start to rebuild rather than moving or going homeless.
“We think we can solve that problem from the ground up,” he said.
Borders believes parametric products like the one being offered by Jumpstart may appeal to younger consumers, such as Millennials, who make favor it for its transparency.
“It is intuitive,” he said. “We think that this parametric product is going to fall into the same ethos that these people are growing up with and that they feel comfortable with.”
Other speakers at the forum included Mark Knepshield, senior vice president of McGriff Seibels & Williams Inc., talking about cyber events, and Morteza Rahmatian, dean of the Mihaylo College, and Weili Lu, director of the center.
Lu and Rahmatian discussed efforts to build a School of Global Risk Management and Insurance at the college, which has taken several years and numerous rounds of fundraising efforts.
The school would build upon the reputation of the center, which has been running for 20 years and has garnered $1 million in scholarships for students, while most graduates quickly get jobs in an industry hungry for new blood, according to Lu.
“I would say 95 percent of (our graduates) are working in the insurance field,” Lu said.
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