One of the biggest problems we face as an industry is scope: ConnectUW CEO

According to Connect Underwriting Group CEO and CUO Jamil Elbahou, numerous issues from the soft market period have not been addressed in the current market and unless these are addressed appropriately, the reinsurance industry will be back to where it started.

ConnectUW is a specialist insurance and reinsurance underwriting group operating in the UK and Europe and a Lloyd’s underwriter. FAC XoL is developing into a mature business with its own niche in the market, with a core London marketplace for property, energy and war and terrorism.

Reinsurance News spoke with CEO Elbahou at the 66th Rendez-Vous de Septembre in Monte Carlo about some of the market issues, from models to inflation, from advanced technology to the group’s immediate future.

“The biggest issue we face is coverage,” Elbahou said. “Some of the soft market wording remains the same, for example, contingent business interruptions and pandemic extensions are still being added. There are also challenges around underinsurance, sub-limit stacking, retention and inflation, which are often overlooked in valuations. We should be demanding up-to-date valuations on an annual basis, and that’s not happening.”

He stressed that these issues have not yet been addressed.

“Of course, we have added some exceptions, increased the prices and narrowed the scope of conditions a bit, but it is not significant enough to prevent us from going back to where we started,” Elbahou added.

It’s clear the CEO feels inflation has not been fully accounted for and he warned that the market is essentially demanding less pay than it did before because of this.

“That’s the funny thing,” he said. “We talk about a tough market, but in reality, if our prices don’t go up enough, they actually get cheaper. When we price renewals, if we don’t get at least a 5-6% increase every year, we’re effectively giving discounts.”

Another challenge that Elbahou highlighted during our conversation at RVS 2024 is related to the models; specifically, the need for the models to be dynamic and properly account for the high inflation environment.

“You need models and you definitely need guidelines and labeling the various regions certainly helps, but I think the models are inappropriate. It’s not necessarily because they are inadequate or the methodology is wrong, and it’s not about people or companies or even technology, but at the speed that inflation is moving, I think the models are not keeping up with the changing dynamics,” Elbahou said.

“I think these models need to be dynamic to the extent that they are active propositions. Perhaps the timeline between updating the models and what actually happens in the market can be improved with inflation. When you PML a loss, I don’t think the modeling takes into account the record inflation and devaluation of currencies that we have all over the world,” he added.

It’s not yet clear whether models will be able to do this, and while Elbahou stresses that they are great tools, he thinks there will always be a gap until artificial intelligence (AI) truly makes an impact.

“These are great references, but in my opinion, you can’t run your insurance business based on what the model says. The model may show that everything is fine, but there’s still a lot of human experience and expertise needed to make the final decision.

“Everyone is doing their best, and until AI really sinks its teeth into modeling, there will always be a gap. So, in summary, I think we need to stay comfortable with the models we have and not treat them as gospel, because there are more elements at play,” Elbahou said.

Finally, Elbahou told Reinsurance News what the near future holds as ConnectUW becomes a mature business.

“It has a unique place in the market and will continue to grow organically,” he explained.

Noting that ConnectUW launched the London-based MGA Stability Risk in 2023, Elbahou noted that the group’s new MGAs will be the focus in the coming months.

“Stability Risk is starting to stand on its own two feet. I have launched two new MGAs in six months and it will take some attention to get them started,” Elbahou said.

Another area where the CEO sees exponential growth for the company is the area of ​​war and terrorism.

“This has been a huge growth area for us because of our extensive understanding of the geopolitical landscape in places like the Middle East and Africa.

“For example, when we write in Lebanon, we know every street, literally street by street. We are very analytical when we write, and that has allowed us to take advantage of the current climate.

“So I really feel like part of it is going to get stronger and stronger and we’ll see where that takes us. We have big ambitions in the political risk area,” Elbahou concluded.