ITC sits down with Paul Desmaris, Chairman & CEO of Sagard and Christian Mumenthaler, Group CEO of Swiss Re, to look at why the insurance industry should be viewing the disruption insurtechs bring as opportunity, not risk.





welcome i’m paul demere uh the ceo and co uh the ceo and chairman of sagar holdings and the co-founder of portage


ventures a financial services technology investment vehicle i’m joined today with the christian movement dollar the ceo of


swiss re who joins us from switzerland i am presently in montreal canada christian welcome thank you so much for


taking the time maybe if we could start uh with a bit of a description of what is swiss re


so swisher is one of the biggest ranchers in the world we have been created after a big disaster about 150


years ago where whole city burned down and people realized that insurance companies which were local were not able


to pay for the whole loss and that we needed a diversification of risk and and people who take risks from all over the


world and then pay in in case of big catastrophe so we’re insurer of insurers


uh and therefore need to think about the biggest risks in the world fascinating


what makes a great reinsurer you mentioned diversification but is that an important


part of being a good reinsurer i think you need a very strong capital base obviously then you need a good b to


b interface because we deal only with insurance companies about 1 500 insurance companies worldwide


and then you need obviously a lot of uh you know r d into risks right we need to understand the risks the insurance


industry for the big risks is looking to us to try to quantify them and see them in advance


and take them basically on our balance sheet so i’d say that’s that’s the key components you need as a reinsurer


fascinating quantifying risks i mean it’s we live in a really interesting period where it seems that there’s a never ever


increasing number of natural disasters pandemics emergence of cyber threats new economies


emerging how how do you see you know where are kind of risk pools that you


are kind of spending more and more time on and what are kind of risk pools of interest to swiss free and how do you


quantify something like a pandemic or or or the forest fires that are going on in


san francisco which i think are you you know generational events yeah you have to see


this has been our job over 150 years right we saw the emergence of motor vehicles so today that’s a big part of


what we do we saw nuclear reactors come so we have created institutions to cover


those uh planes etc so this is natural right there’s new things new inventions


and we need to think about the risk and gather the data for that try to look back in history try to do


models for example for natural catastrophe we have physical models right with physics and simulating events


going into the us for example so that’s why we have huge departments trying to understand the risk and that’s the same


for new risks like cyber right a few years ago we had very little data now we have more data we create scenarios we


try to think how this will propagate through the world same for pandemics which for more than 20 years a modeled


risk right in the insurance and reinsurance industry so we we tried to think ahead we tried to


gather the data try to make models and also socialize those right so that other people can see those and bring input to


those so that we can quantify and and take over the risk on our balance sheet


when we talk about the big risk pools that we are worried now i think the whole natural catastrophe era obviously


and the impact of climate change on that right that’s a big area of research currently and we see evidence for


certain risks in natural catastrophe field that we see changes in in patterns and then


cyber i’m sure we’re going to touch it again maybe later uh is clearly a field which needs a lot of research and and


which is quite worrying right uh overall in terms of a risk that is actually evolving it’s not the fixed


rate the risk that is evolving you touched on automotive risk being a


big part of your business um tesla mentioned that they were thinking of starting an insurance company within


tesla uh i read that you have a partnership with bmw uh in your group


how how how have you seen the kind of you know growth of telematics growth of


personalization the emergence of lots of different models like root uh but as


well the total change in the nature of the costs of damages as kind of cars get you


know damaged but you know it used to be that when you got in a fender bender your fender was just a piece of metal


that could be easily replaced today your fender on a car is nearly you know as


expensive as a computer um how how how do you think about that business and why


why did you seek to do a partnership with uh with with the manufacturer so the risk side of all of that is not


that hard to understand right because you have lots of data you can analyze the data you can find correlations all


the the usual stuff but there’s a lot of technological developments in the car sector as you


can imagine and i would say telematics is sort of version 1.0 so the idea to


have something more specific so people only pay if they drive etc and it hasn’t really picked up that much right it’s


not that popular for people to pay something extra to put a device into their car uh it’s an extra step people


have to take and it only works in some parts where insurance otherwise is too expensive right like in the south of


italy or so um so it’s i think it’s very interesting and we have some skills in that but it hasn’t really completely


taken off i think what is new now is with companies like tesla and increasingly other uh car companies is


that they have so much data right online uh real time uh and so they basically


have all that you used to have for this telematic uh you know dongle you had to put into the car they have it already in


the car they have all the data so with the data that they have you could do a much much better risk


assessment than with the data that typically an insurance company gets which is just what type


what type of car do you have how old are you et cetera right you have a few parameters but now i think you can start


to quantify the risk in a much much more precise way because it depends also how you drive the car right


and with all the data they have you can find new correlations that’s the kind of work we do with pm bmw right in germany


and with some other players because this would allow the insurers to price the risk much more uh precisely


but i think if you think version two or version three where could this end up with it it would be


let’s say you buy a tesla and under the service screen there’s lots of services and one of those is insurance and you


can switch it on and off any day you pay it through your monthly bill with tesla and then the the price per


mile driven is a function of how good you drive right and the car gives you feedback yeah you’re driving too quickly


you seem to be drunk i’m not sure the car will be allowed to tell you that but it can detect it right that’s pretty


sure and so you can imagine something where you get just much much safer through this feedback loop right i think you’re


going to reduce the number of accidents insurance is going to be more cheap and if you have an accident the car actually notices right it knows it


because that senses everywhere it can call the ambulance directly right if you’re in unconscious


or if you need to repair it it just tells you that’s where you can go right you don’t bother calling an insurance company et cetera so just go there it’s


going to be repaired so you can imagine a a in a future version something much more integrated which is i think much


better for the consumer and that’s the kind of thing we’re thinking about fascinating speaking of integration have


you tracked the emergence of a us company called root and uh and and its growth in terms of you know you know


the concept of the the tesla having this computer and knowing how you’re doing


they’ve kind of done a little bit like ways and are using the iphone as a sensor in the car um it’s it it’s it’s


it’s a risk that’s fascinating but there seems to be a lot of these new concepts that are emerging in the insurance world


in the united states and and ipointing at these incredible valuations how how


how how do you see these new players and and and do do they pose a do they pose a


threat to a company like swiss re or are they actually a a advantage and a potential partner


yeah i think you need to think from the consumer and how the journey would be and all the elements you can have in


there and i don’t think everything needs to come from big corporations right certain elements if it’s a flexible


system with apis etc could be delivered by other players and if you think about the maps the ways all of that it’s


obvious right that there’s a correlation between risk and the time of the day which route you’re taking


the weather situation etc etc there’s tons of data around which if you integrated all of that could actually


give a feedback loop to the driver and help them to be much safer right you could say not just the


fastest route or the cheapest route you could also say the safest route which might be a different street at different


times of the day depending on different conditions of the weather and so i think there’s a lot of space for lots of


players right to to add something to this whole value chain and i guess that’s that’s how i see it play out i


mean innovation is always something good fascinating fascinating um


in terms of you know recent activity of of of your group in in


in in venture i i read that you’ve made uh an investment in china in in


in a company called water drop with 10 cent how how do you see the insurance landscape


in china emerging and are you playing that market through these types of investments or are you also kind of very


active directly in china yeah i’d say generally we’re it’s not


part of our strategy to invest minority shares into these startups right either we buy them completely or work with them


but i’m not a big believer in having just shares uh in them but china is a bit different right china


is a big market for us we’re the the biggest foreigner already in china we we are allowed to be there we have very


good experiences in china we’re very close to the three you know super big groups in in china who do insurance and


i would say that the insurance companies in china are just further ahead right overall than we have in the west why


because they were created later and they leapfrog technology in a big way and so


in terms of data management i mean not all of them and not in every line of business but overall they’re much more


open for innovation they’re using you know much more technology they’re trying to understand the risks you know in a


much more granular fashion and we’re we have we’re limited capabilities to


invest in the insurance groups there so what we also look at in china is are there potential


distribution channels for insurance uh and are are there ways for us to start to create


um i i wouldn’t say the word ecosystem but partnerships right where we can


dock into other people and potentially help for example sell white labeling in insurance


and water drop is definitely a company who has access to millions and millions of customers and where we can see some


of that potential so that’s so it’s an exception to the rule we can see some uh interesting avenues with them


fascinating speaking about china um we have a big thesis as a venture fund


that the banking world and the insurance world the supply chains are shifting and


while banks and insurers used to be vertically integrated uh platforms where


an insurer did its claims that its underwriting did you know all the different parts of the value chain a


banks did you know the check processing the check clearing the deposit accounts the kyc


we have a thesis that a lot of those different components of the value chain are going to get segmented and that


platforms are going to emerge that become the backbone of of of many different players in the industry rather


than just you know having every player being vertically integrated um i noticed you announced a partnership


with oneconnect the um the kind of technology arm of penghan


is that kind of going towards that idea of you know hey there are different parts of your business that are best


kind of outsourced to you know specialists how how how how do you see the kind of value chain of insurers uh


and the things that insurers do in-house versus outsource evolve and if you could speak a little bit to what you’re doing


with with uh with uh with ping-an and oneconnect yeah so uh knowing the insurance is


really quite well right i think you can look at every value chain element and you can do it better right there’s no


question about it and the the ceos of big insurance companies know that they just have limited means and they need to invest in some of them uh many of them


have legacy systems that are 10 years old 15 20 years old so they’re moving but it’s it’s not moving


at light speed obviously right they’re just slowly moving and so i definitely think there’s the opportunity for insure


tech or reinsurers right to deliver a service that is specific for an element in this value chain which might be used


or not right by by the uh insurance companies so one one service we offer now since about


30 years called magnum is basically a software that can be used on a tablet these days by sales agent of insurance


companies in the field and it’s the question how do you ask the right question in which order to to get the


most honest possible answer and to be able to judge whether we can take a particular risk right it’s on the life side on the mortality side and you might


say this is very trivial but it’s actually there’s a huge science behind that right of how to make sure people don’t lie and what you ask and how you


can take the risk and that tool now is is used about 14 million times so 40


million lives per year are underwritten through that system in the us in europe and in china a big part of it is in


china actually we have a chinese version and so that’s where we have just one slide so we’re not a startup but we have


this system that is used in the value chain of the insurance company and it’s


very successful and it allows us then also to have reinsurance from that company so thinking about that we try to


look at other slices right where can we part with whom and in this particular case we uh we’re close to pingan as a


big client of ours we could look at their technology what is most advanced they want to bring some of the


technology into europe into the u.s and they see swissv as a as a conduit right as a trusted partner that will make it


easier and so we can look at that technology combine it with some technology from from a startup on the


claim side on the motor claim side and that’s that’s the idea there right and we’ll see whether we’re successful but


you can bring together some really interesting elements of data on the claim side and


some of the very interesting technology that they have very very interesting um


in terms of you you you know continuing on this value chain i mean historically


reinsurers have worked with primary uh insurers in terms of you know offloading


you know parts of the risk or entirety of the risk with the emergence of all these new kind


of startups uh reinsurers have played a really important enabling role


in the growth of you know a lot of these disruptive platforms in the industry


can you tell us a little bit about these kind of blurring lines and how you manage you know the relationship with


your kind of traditional customers um in a world where you’re also kind of empowering some of the new


some of the new disruptors yeah and i guess you know the word disrupter is maybe a bit too strong


right i think it’s important just to be uh you know fair to the reality which is that um there’s not been any insure tech


which has sort of bypassed the traditional player in a big way and i haven’t seen any you know particular ip


or quality or network effect that would allow any single one of them to bypass them easily right there’s some


successful insure tech don’t get me wrong but uh i haven’t seen anything sort of you know disruptive right that’s


i haven’t seen any of that so um i think it’s a bit like in the banks right in the end there’s going to be the


big players they’re still there they have a brand and the brand plays a huge role in insurance and become maybe come back to that there’s this behavioral


economic uh sort of component to that and why this is so and so it’s more question in the


value chain you’re right it’s blurring a little bit i still think there’s going to be reinsurers in the in the future


there’s going to be prime insurers but this new combination being done right this insures bypassing the sales they go


directly to the consumers there is us for example creating a digital insurer we have a white labeling digital insurer


called iptq which is hugely successful and can basically link to any brand in the world anybody who wants to sell


insurance within a few weeks can be on the platform and sell their own insurance under their name right so it’s


not hard to create an insurer a digital insurer it’s hard to sell right which is why we go together with um with some of


these brands and then of the some insurers are keeping more of the risk or developing reinsures so i think we’re in


a phase where people test out different things and how we can get more effective and therefore


when you’re a reinsurer like swiss3 you need to have optionality right you need to explore different things in the value chain to


to understand where this could go right you need optionality i think the right word interesting iptaq has had tremendous


growth and you know in your investor deck you kind of highlight it that in many ways it’s it’s a startup within


your organization and uh how how do you think about that how how have you at swiss re


organize yourselves to innovate and you know how have you managed to create


you know this incredible growth platform within your organization uh which is not something that you often see in insurers


you know other than places like penghan you you know in the west uh you you’ve


not seen the tremendous growth of startups within you know certain insurers


as much as you see kind of startups you know being independent and growing on their own how how have you organized yourself to drive


the success of this uh of this entity yeah so that’s the right question right it’s super hard super hard


because um if you isolate them too much then you get this dynamic inside of the company


of us versus them and most of the company just waits for the moment they can destroy it right or assimilate it


because i think most corporations of all right want to assimilate uh things um but then if you bring it too close it


gets assimilated and it’s gone and nobody wants to work there we need to work there so


knowing all of that and seeing a lot of the challenges we have created a system where you have a layer in between


uh who has a hugely important function which is to shield the startup from the rest but not for


everything so there are very clearly defined a few key things that need to be fulfilled right a few principles etc we


cannot have unethical behavior cannot have legal or cyber risk or things like that you know endanger our reputation as


we three so that it’s clearly defined but we don’t let the whole organization come in and help right so this shielding


layer while maybe an unsexy concept uh has been hugely successful and obviously


i support it and anterior who who pushed is is supporting that and that allowed


us to basically have startups inside the company where also swishy people went in it’s not all


you know alien people but a lot of them are coming from the insurance industry um


and yeah i mean it’s it’s it’s our unicorn we call it right it’s it’s clearly grown very well and the kpis


look very similar to those of lemonade so i look at the evaluation of lemonade as a guidance


and a dream but joke aside it’s obviously a slightly different business model than lemonade but it’s it’s i think it’s it’s yeah


it’s very successful we’re big believers in it you spoke to the power of brand um


you you know swiss re is an incredible kind of brand of stability and has has


been a leader in the reinsurance base for very long how what what what what do you think drives brand value in the


world of insurance and may and maybe if you segment that between kind of the traditional insurance and the kind of


new emerging brands how how do you think about brand value in your sector


yeah i think brand is obviously incredibly important right even though we say no no it’s not so maybe on the


reinsurance side our brand is is great because it gives us access to any corporation right any big corporation in


the world when we approach them and say uh you want to sell insurance they will say okay swisher is a b2b player it’s a


risk knowledge company it’s 150 years here we can trust them right they will deliver it will work right we won’t


crash and if you get into trouble they will help and so for iptq it’s enormously valuable right for example


that because this is a white labeling on the primary side i think there’s something more interesting to say


and that is uh you know in this in this uh insurtech craze a few years ago you


could clearly see that some people thought and had observed correctly that the the value chain is very inefficient in primary insurers and therefore they


can do better that’s correct and so they thought i’d do better i can sell a product cheaper and therefore all the


people come to me i have a network effect i bypass everybody and i kill the traditional insurers


and that’s that is intellectually very compelling the problem is it doesn’t work like that in reality and i think


that’s what most people miss right i think it’s very hard to do a full-blown primary insurer and the reason is


behavioral economics or brain science which i think a lot of people should read right there’s a lot of very interesting books um around and they


show how human beings are irrational basically highly irrational beings who occasionally through huge effort are


able to do uh to fulfill a rational thought right there’s level one and level two we have in our brains and uh


so what does it mean it means most of the time most people are in autopilot gut feeling mode


and therefore you and thinking about insurance is totally alien to that mode right because it’s a


highly unnatural behavior to think about your future think about negative things think about probabilities so the act of


buying insurance our behavioral economics team call it anti-magnetic right it’s it’s


unnatural um you have to get into this mode too right where you use much more glucose and uh you you need to get into


rational thinking to fulfill that act so if it was a normal state to buy


insurance very intuitive then i think you would win with that system right because it’s cheaper and therefore


people come but because it’s so such a hurdle and usually you need a person to basically shake you and you know yes i


know rationally i should buy it okay since you’re here i’m gonna do it but you’re not gonna surf in the evening right for for insurance and so because


of that i think that’s a huge help for the big established brands because if you do it and at least you do it with


something you have trust and you have heard about and that’s why that’s why it’s so hard


right for the banking fintech the insurance fintech to get any significant traction uh on the client front


obviously you can do something great right and all other value chain elements and that’s why i think the original idea


of many of those to bypass the big banks has has transformed into let’s be bought by a big bank or let’s


work with a big bank or a big insurer so that i can create value right which you can it definitely can


but but it’s i think that’s um probably one of the most misunderstood concepts in insurance


fascinating well that that is really interesting people you know in our world has often said you


know insurance is sold and not bought and ultimately especially in life insurance the person that’s able to


crack the code and make life insurance be bought and not sold will end up being


a very very wealthy individual it’s interesting there are you know people say that there are trigger points in a


person’s life that drive an insurance purchase um you know you mentioned cyber


um you know cyber is obviously a growing threat um in uh in the world of business


uh and in the world of individuals how how how are you seeing the cyber insurance


industry kind of emerge and evolve yeah so cyber is obviously a growing


insurance pool many people still don’t buy it to the point before i suddenly have to pay for something you didn’t pay


last year so why have it in the budget right so this is a huge risk everything understands is a risk but people don’t


buy it yet but it’s growing and so what we did is analyze all the risk scenarios right and the problem is some of these


risk scenarios are not diversifying right the risks are of data theft in the company is diversifying so you can have


premiums from all the companies not all of them will be attacked at the same time so you can pay this one loss but a


virus that spreads across the world and and destroys all small and medium enterprises i mean all a lot of them at


the same time is basically a risk we cannot take it’s too big right the insurance industry doesn’t have enough capital or if you think about an act


that would bring down a cloud now that we have more more concentration in some of them and it gets very hard to do it i have to


admit that but that becomes scenarios that are you know aggregating across so


what that means is you need to think about that and there’s limited capacity in the reinsurance balance sheet at some


stage there’s not enough capacity anymore and there’s no solution to that the only solution is to either exclude


the very big ones or find a state sort of a public partnership right uh


public-private partnership um as we did with terrorism in the us for example and in uk and in netherlands and in germany


so you i think the only way to solve that is basically for the state to say for the very big things we’ll have to


jump in anyway so it’s better we admit that in advance and then the insurance and reinsurance sector can play within


the more you know normal uh cyber risks and then i think we’ll that will work but so far there has been very little


appetite to talk about that because the risk hasn’t materialized yet that’s typical also for the human brain so we


we’re not progressing anywhere in at the governmental level with that kind of ideas which means that in in maybe two


three years there’s not going to be cyber capacity anymore right unless the capital market suddenly discovers huge appetite for that uh particular risk so


that’s that’s one of the challenges i can see yeah speak you mentioned that the capital markets this is something that


that’s fascinating speak a little bit to the role that the capital markets actually play in your


in your industry because there are kind of cat bonds and tons of innovation in terms of capital markets products to


basically spread risk more broadly speak speak a little bit to that yes so the success so far is mostly around the


natural catastrophes right because for different reasons i think one is you can quantify the risks there’s independent


companies quantifying the risk you can do it quite well it’s a short-term risk so you can create a three-year bond that


covers you against a hurricane for example and at the end of the three year no you know whether it has been a


hurricane or not and then because capacity is tied so it’s a very big risk


on all re-insurers across the world the prices has gone up so that there’s enough margin to actually issue a bond


at an attractive rate uh and the the the potential is much bigger right in


california i think 15 of people are insured against an earthquake i guarantee you the earthquake will come


right and so there’s this big protection gap that’s still here so but if everybody bought uh insurance the


reinsurers would not be able uh today to cover all this risk it becomes too big so this is where i think capital market


absolutely has a role to play and is playing a role in this whole natural cadastral field


it has tried to go into some others so we also had pandemic bonds in the past which we issued the first one was 2003


at the time so that’s also acceptable maybe cyber i think the longer term risks are much harder to um


to put to the capital market so people don’t want to buy a 50-year bond and wait for it a longevity trend to turn


sour for example much harder so i think it’s it has a clear space at this stage it will move the boundaries but the last


20 years it stayed more or less in the same boundaries of the natural catastrophe field


final question you know if you look at 10 years you know what are the kind of


what are the pillars that you’re hoping to leave as your legacy as kind of ceo


of swiss free and kind of how how are you hoping to have you know put your thumbprint on the history of this


incredible company yeah that sounds too ego for a swiss right we tried we tried to follow a a servant


leadership approach right we served the company we tried to bring it forward it’s a 150 year old company


my dream is to leave it in a better state than when i took it and i took it in a good state right but i want to make sure


we think about the next 150 years and how it progresses on that and for that i think it’s important not


just to have reinsurance because you know that maybe i think the base scenario is going to be good but we need


optionality in the value chain if you want to survive long term you need some of that and to me things like what we do


in in iptq is part of that it’s deeply strategic and i think to innovate in in this value chain to


create this end-to-end basically digital insurer without the sales part right white


labeling is something i think that that could be extremely successful right and and help many people sell insurance help


close the protection gap and things like that so yeah i i’m quite passionate about that but we also look at other


elements in the value chain and what we should do so to me that’s that’s the key right it’s not something specific it’s just to know


that when i leave uh the company has more options and more chances for very long-term survival


amazing well christian thank you so much for your time really insightful in terms of your


comments congratulations on the success that swiss free has had thus far and


congratulations on the partnerships that you’ve done with so many innovators around the world i know we’re partners


with you at hellas direct in greece uh you know truly you know swiss re has been at the forefront of the uh


innovation in insurance and so congratulations and thank you so much for your time thank you paul very kind of you



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