Taking the lead

Swiss Re’s new regional chief Sharon Ooi sees knowledge and innovation as the best way to tackle changing risk challenges

By Wendy Pugh

With natural disaster risks a rising national concern, premiums increasing and a pandemic underway, Sharon Ooi is heading Swiss Re’s Australian and New Zealand business at a critical juncture.

Australia is still recovering from last year’s bushfires and hailstorms while dealing with more recent floods and catastrophes. The Federal Budget has powered up mitigation funding and the Government has backed a controversial reinsurance pool for cyclone risks in the north.

Ms Ooi, who took over Swiss Re’s top local role last year, says the mitigation commitments are a particularly welcome development in the current environment, with better understanding of how to reduce exposures and risks critically important at all levels.

“The affordability discussion that continues to take place in the property insurance space is really being driven because the exposures continue to increase,” she tells Insurance News. “If anything can be done – and it is great that Government has stepped in to mitigate – then that is very positive.”

Ms Ooi says governments and the insurance industry both have roles to play in reducing risks and addressing immediate impacts from natural disasters, while also looking at the long-term implications of changing climate perils.

“The industry works on the basis of sudden and accidental losses. We are here to provide that cover such that if something untoward occurs we are able to pay out and build in financial resilience,” she says. “But with the increasing frequency of a lot of these things, there is also a part that governments can play to bring down the exposure.”

Australia’s recent experience has highlighted the extent of potential damage from the type of natural disaster risks often described within the industry as secondary perils.

These risks, such as hail, flood, storm and bushfire, have tended to be more localised than primary catastrophes such as earthquakes and cyclones, and have been less well modelled. But they are becoming an increasing driver of losses as climate and loss patterns are changing.

“It is really for us to work with our clients and ensure that there is an ongoing understanding around these secondary perils and then to be innovative, creating new products and new ways to better understand these perils so that we are across some of the loss drivers.

“This also then means partnering with the Government on mitigation.”

Natural catastrophes have fuelled surging insurance premiums in Australian regional areas, particularly for high-risk properties or insurance classes, intensifying concerns around how affordable and accessible insurance will be, as well as how long the hard market may last.

Ms Ooi says higher pricing reflects a change in risk fundamentals, with the increases of recent years more in line with impacts, rather than just representing a retraction of capacity or the ability to charge more, as has occurred in past hard markets.

“Because insurance and reinsurance is such a global industry, I think there is capacity, but what is driving some of the rate increases is more around the exposure increases, as well as in the underlying risk,” she says.

So is there any sign of relief ahead for insurance buyers? Ms Ooi says advances in technology and expertise will offer improvements in assessing and managing risks that will benefit insurers and policyholders.

While there’s no “one-size fits all silver bullet”, opportunities are there to improve affordability and increase insurance penetration rates.

She says smart analytics and data science will support greater understanding of underlying exposures. More will be learned about climate impacts and multi-faceted approaches will facilitate innovative solutions.

Diverse background: Ms Ooi trained as a scientist

“Government will play a part in enabling mitigation, [and] the insurance industry must play its part in investing in research and technology and data. And individuals absolutely can play a part as well.

“If you explain to policyholders what they can do to mitigate their risk, how they can reduce exposure to flood events or to bushfires and the like, they will step up to do it.

“But that educational process needs to be there, and the research needs to be there.”

Ms Ooi says it’s too early to assess the likely impacts of the Government’s $10 billion guarantee for a reinsurance pool in northern Australia. A Treasury-led taskforce is looking at the design and operation of the pool, which is due to come into effect in July next year.

“Definitely more information is needed, but we are very happy to be part of the conversation,” she says. “It is important if anything is rolled out it is rolled out in a sustainable manner and meets the needs of all the policyholders.”

Consumer criticism of the reinsurance pool has partly centred on its relatively narrow focus on cyclone damage and related flooding north of the Tropic of Capricorn, when other parts of the country also suffer from natural disasters.

Ms Ooi says natural catastrophes don’t acknowledge borders, but considerations that must come into play when looking at the formation of a pool include the level of private industry support available and an understanding of the specific problems that need to be solved.

Swiss Re is well-placed to share its experiences on what works and what doesn’t, having worked with government-backed reinsurance pools around the world, including Flood Re in the UK and the National Flood Insurance Program in the US.

Ms Ooi says that as a general principle, the giant reinsurer is supportive of measures that close the protection gap.

“The role that reinsurance plays is always to provide additional capacity to insurance companies and also to governments, because governments want to protect their own balance sheets,” she says. “For us, we see an opportunity with a number of these announcements to work with the parties involved, the insurance industry or with government, to see how we can play a role there.”

Swiss Re, which is based in Zurich, has clout as one of the world’s largest reinsurers, with a network of around 80 offices, covering both property and casualty and life and health risks. Globally, the property and casualty business reported net premium earned of $US20.8 billion last year.

In a challenging year, property and casualty reinsurance suffered a $US247 million loss including COVID-19 impacts, while elevated natural disaster impacts were largely driven by the Atlantic hurricane season and global secondary perils. First-quarter catastrophe losses reflected the company’s strong presence in Australia, where hailstorms and flooding followed the bushfires.

Ms Ooi says Australia is a very important contributor to the overall group. If the country doesn’t have a good year the impact will be seen at the wider-company level, while the reverse is also the case.

COVID-19 impacts remain a key issue for the company globally as insurers, governments and businesses consider protection amid the ongoing pandemic and recovery implications.

The Insurance Council of Australia (ICA) has launched test cases on business interruption wordings and exclusions. The issues involve a number of insurers including Swiss Re, while a similar process has concluded in the UK.

“We agree with the ICA findings that the insurance industry was very clear that pandemics were not a risk that were included in the covers, and to be fair it is also not a risk that can be diversified,” Ms Ooi says.

Swiss Re is closely following the progress of the test cases, and working with clients to see if more can be done around some of the other aspects of cover. Globally, the reinsurer believes pools with government involvement offer solutions for problems that exceed private industry capacity, although it’s not clear if Australia would consider such a path.

“If government feels that pandemic exposure needs to be covered in a more sustainable way on a go- forward basis, then we would be happy to discuss a pool situation or proposal,” she says. “But we haven’t as yet had those discussions.”

Since arriving in Australia Ms Ooi has focused on meeting clients, gaining a greater understanding of their needs and learning more about the local market, while looking at the potential for innovation, technology and partnerships to deliver solutions.

Such initiatives include advanced driver assistance system scoring, which taps technology to help improve safety while also helping insurers to benefit from compulsory third party profit incentives aimed at reducing personal injury.

The company has also worked with major broker group Steadfast on a tracker that identifies flood risks at specific addresses. The tracker uses Swiss Re’s CatNet tool, accessing satellite imagery, flood mapping, climate change data, catastrophic event impacts and population density details.

On the life insurance side, the company is looking at the industry-wide challenges around the sustainability of disability income products. It sees opportunities to partner with clients around products that are more affordable and fit for purpose in meeting policyholder needs.

Ms Ooi says reinsurers have much to offer in taking a lead on innovation and building understanding around the many critical problems that need to be addressed.

“There are a lot of big issues that are at play currently,” Ms Ooi says. “We need to bring more to the table, so getting that understanding is important.” 0

Science proves the pathway

When a Singapore bank decided to employee people from diverse academic backgrounds it unexpectedly created a pathway to insurance for Sharon Ooi, who holds a degree in cell and molecular biology.

Ms Ooi had planned to pursue scientific research after graduating with Honours from the National University of Singapore, but her parents challenged her to gain work experience and to test the employment market.

“I didn’t want to, to be fair, and I thought I was being very smart by applying to a lot of financial positions in the market space, understanding that no one would hire someone with a hard science degree,” she says.

As it turned out, Singapore’s OCBC bank was undergoing a transformation building a workforce for the future, and a focus on diversity included bringing in graduates without traditional finance or economics backgrounds.

“They were very happy when they got my resume and I got hired into their graduate program quite quickly, and it really framed a lot of my views around diversity and inclusion.” Ms Ooi says.

“Just having a very big bank in Singapore take a chance on someone who doesn’t fit the normal profile of a finance person was very interesting, but it also then opened up a whole new industry to me.”

Ms Ooi was involved in risk management at the bank before being headhunted by reinsurance company General Cologne Re – rebranded as Gen Re in 2009 – which had also taken a positive view on the benefits of a hard science background.

“They felt the thought process of a number of these individuals, along with a lot of actuaries, was very aligned with risk assessment and understanding risk – not only the current exposures but the future impact of risk exposures as well.”

She says science requires considerable research and experimentation. “You have to challenge a lot of the premises that you have.”

Ms Ooi joined Swiss Re in 2006 as head of the Property and Engineering Treaty business for Southeast Asia and India after it acquired GE Insurance Solutions, where she worked for five years as part of the regional leadership team.

In 2017 she became Swiss Re’s head of property and casualty for the Asia Pacific region and last September took up the role of Head of Australia and New Zealand, effectively swapping roles with predecessor Mark Senkevics.

Ms Ooi arrived in Sydney in November after family arrangements were finalised and has settled into Australian life with her partner and son, while her daughter is completing studies in Singapore.

The household’s pets also made the journey, enjoying a relatively easy transit amid COVID-19 impacts, given Singapore’s low-risk status for animal imports.

“We have three cats and two dogs that came with us,” Ms Oooi says. “They quarantined for 10 days and we had to quarantine for 14.”

More women have recently taken up senior roles at insurance sector companies and at the top of industry representative groups in Australia, although Ms Ooi sounds a note a caution amid the encouraging signs of progress.

“I am optimistic [but] coming from a hard science background, I think we need to have more data before we call it a trend.”

Swiss Re research shows that in Australia, Japan and India less than 10% of CEO positions at reinsurers and insurers are held by women, although Australia is an outperformer in some respects with women chairing almost a quarter of industry boards, versus a global average of just 8%.

Ms Ooi says more companies are appreciating that change won’t happen until it is actually measured, “because what gets measured gets done”. While corporate boards are increasingly looking at inclusion and diversity, she says there’s more to be achieved.

“I think we can always do better,” she says, vowing to take “any opportunity” to champion diversity and inclusion in the industry.