{{indexingdisabled}} Best's Review - March 2023 Edition - Kuczinski Interview: Catastrophic Risk

Contents

  1. Cover
  2. Desk: Re Broker Evolution
  3. Contents
  4. Calendar and Executive Changes
  5. Executive Changes and Web Traffic
  6. Executive Changes and Fed Reserve Appointments
  7. Insurance Marketing: Business Goals
  8. Insurance Marketing: Center of Excellence
  9. At Large: Framework for the Future
  10. Risk Adviser: Asset Allocation
  11. Risk Adviser: Insurance to Value
  12. Regulatory and Law: Cybercrime Limits
  13. Issues and Answers: Excess and Surplus
  14. Issues and Answers: Philadelphia
  15. Issues and Answers: WSIA
  16. Issues and Answers: Nationwide
  17. Kuczinski Interview: Catastrophic Risk
  18. Asset Management: Commercial Real Estate
  19. Asset Management: Economic Headwinds
  20. Life Insurance: Death Benefits
  21. Life Insurance: Death Benefits Paid
  22. Reinsurance Brokers: Landmark Deals
  23. Reinsurance Brokers: ILS Trends
  24. Reinsurance Brokers: Gallagher Interview
  25. Reinsurance Briefing
  26. Reinsurance Briefing: Renewals
  27. Reinsurance Briefing: Florida Litigation
  28. Imaging Robots
  29. Imaging Robots: Underinsurance
  30. Bests Rankings: Private Crop and Structured Securities
  31. Structured Securities and Aquarium Risks
  32. Bests Rankings: Crop-Hail Rate Filings
  33. Crop-Hail Rate Filing Decreases
  34. Book Store: Online and App Store: Digital Experiences
  35. Trending News and Research
  36. Webinars TV and Audio
  37. Rating Actions
  38. Rating Actions Americas Europe Asia Pacific
  39. In Other News
  40. Professional Resources: Crown Laws
  41. Bank of England and Regulations
  42. Last Word: Cyber and Social Media
  43. Back Cover
 
30-31 30-31
Product manufacturing

Real Expertise. Real Specialization.

From property and casualty to personal lines, our excess and surplus team specializes in complex
and hard-to-place risks with tailor-made solutions that work.

100

company
Fortune

A+

Excess & Surplus
AM Best FSC XV

A+

Standard & Poor’s
(12/1/2022)
(5/7/2021)
Experience our expertise:
nationwide.com/experience
Products unavailable except through a licensed surplus line broker. Availability varies by state. Policy eligibility is subject
to underwriting
qualifications and approval by the insurer writing the policy. Insurance products underwritten by eligible surplus lines insurer
aliates of
Nationwide Mutual Insurance Company, One Nationwide Plaza, Columbus, Ohio, 43215-2220, including Scottsdale Insurance Company
(unlicensed except in AZ, DE and OH), Scottsdale Indemnity Company (unlicensed in AZ and DE), or Scottsdale Surplus Lines Insurance
Company (unlicensed except in AZ and NJ). Scottsdale Surplus Lines Insurance Company is not an eligible surplus lines insurer in CA.
Nationwide, the Nationwide N and Eagle, and Nationwide is on your side are service marks of Nationwide Mutual Insurance Company
. AM
Best A+ (12/2021, The second highest of 16 ratings). Standard & Poor’s A+ (5/2021, The fifth highest of 21 ratings). ©2022 Natio
nwide.
is on your side
https://nationwideexcessandsurplus.com/public/news-insights/index.jsp
SPECIAL ADVERTISING SECTION
SPECIAL ADVERTISING SECTION
Issues & Answers
Ashley Moffatt, SVP Brokerage, Primary

E&S Market Leader

Casualty for Nationwide E&S, said their
ultimate goal is to be a top 10 carrier with their
key distribution partners. “Some initiatives
that I’m particularly excited about include
investing in third-party tools and technology to
enhance our data-driven decisions, as well as
building out new product offerings to promote
profitable growth opportunities,” she said.
Following are excerpts from an interview.
Ashley Moffatt
SVP Brokerage, Primary Casualty
Nationwide E&S
What’s driving the flow of business into the
nonadmitted market?
Several factors continue to drive business into the E&S market,
including higher economic and social inflation, nuclear verdicts,
climate risks, supply chain disruptions and the courts reopening
after pandemic lockdowns. These things create uncertainty and
risks in the traditional commercial insurance space. The E&S
market is uniquely qualified to respond to these changing market
dynamics, and we continue to serve as that relief valve for the
difficult-to-place coverages, emerging risks and complex risks.
Are you seeing an increase in difficult-to-place risk?
Yes, we certainly are. The brokerage individual risks sector,
in particular, is designed to pivot with those market cycles.
Naturally, as more of this tough business finds its way to the
E&S market, it’s going to land on our underwriters’ desks.
Our brokerage underwriting team has the expertise to provide
creative solutions for larger, more complex risks. We can utilize
a choice of different rating plans, both industry, company and
manuscript endorsements, policy supplements and deductible
self-insured retention options. Our staff has the expertise to tailor
the policy needs to fit a wide range of industry classes.
Has the E&S sector been immune to the talent gap
that other sectors are facing?
The E&S community has certainly not been immune to
the talent challenges that the other sectors ar
e facing. The
COVID-19 pandemic has r
esulted in a very competitive hiring
environment as employers compete for a limited pool of
workers. While no company is completely immune to these
external factors, I am pleased to say that Nationwide E&S has
been very successful at attracting and retaining top talent.
We’ve worked hard to build a culture where everyone feels
valued and empowered to make decisions, a culture that’s
recognized for being diverse and inclusive. Finally, we have
“I’m thrilled about
all the amazing
work that’s been
done and will
continue to be
done to make
us a carrier of
choice in the E&S
brokerage space.”
Visit the Issues & Answers section at
bestsreview.ambest.com
to
watch an interview with Ashley Moffatt.
a strong focus on talent management to help ensure that we
have the strength we need for the future. It’s no secret that in
the E&S world, specialized expertise wins the day, which is why
our entire E&S leadership team feels passionate about investing
in our people to unlock their top potential.
What makes Nationwide E&S a leader in the surplus
line sector?
Our E&S team’s guiding principle is to protect customers
with unique risks that the traditional insurance market can’
t
serve. How do we do that? W
ith world-class underwriting,
specialist-to-specialist expertise, and deep mutual partnerships.
Nationwide’s brand recognition, financial strength and breadth
of product and appetite make us stand out as a market leader.
In brokerage specifically, our leadership team has been heavily
focused on important strategy work, building up the capabilities
to scale our business in a deliberate and meaningful way. On
the nonconstruction side of our business, we’ve rolled out a
new products manufacturing appetite for both primary and
excess casualty, and we’ve made some solid tactical hires to
significantly grow in these classes.
Share this edition at
https://bestsreview.ambest.com/issuesanswersarchive.html
.
BEST’S REVIEW • MARCH 2023
29
https://bestsreview.ambest.com/issuesanswersarchive.html
https://nationwideexcessandsurplus.com/public/news-insights/index.jsp
https://players.brightcove.net/819002453001/default_default/index.html?videoId=6319723128112

Kuczinski: Insurers Can’t Handle

Climate Change, Catastrophic

30

Risk by Themselves

Retired Munich Re executive Tony Kuczinski spoke to
Best’s Review
about
how insurance companies have to do a better job of speaking as an industry
to deal with rapidly evolving risks. But they can’t do it alone.
by Tom Davis
N
ow that he’s retired from his position as
chief executive officer of Munich Re US P&C
Cos., Tony Kuczinski has a message—not just
for the insurance industry, but for everyone with a
vested interest in climate change and catastrophic
risk.
The insurance industry needs to work together
to better handle the challenges it’s facing.
But insurers can’t solve these problems all by
themselves, Kuczinski said.
Kuczinski, a longtime contributor to
Best’s
Review
, discussed climate change, catastrophic risk
and other pressing issues facing the industry in an
Tom Davis
is editor. He can be reached at
tom.davis@ambest.com.
BEST’S REVIEW • MARCH 2023
interview conducted after he departed Munich Re
on Jan. 1. He served 33 years at the company and,
since 2008, Kuczinski was responsible for Munich
Re US P&C Cos.’ property/casualty reinsurance and
specialty insurance businesses in the United States.
Following is an edited transcript of the
interview.
How have Munich Re US P&C Cos. grown
and changed during your tenure? Are there
certain accomplishments that you are most
proud of?
I’m proud of the fact that what we have
achieved over the past decade and a half is in line
with what we set out to do 15 years ago. We drove
growth, profitability, diversification and expertise,
Executive Interview
mailto:tom.davis@ambest.com
“To date, the industry has done an
excellent job of fulfilling our promise
to bring people, businesses and
communities from harmed to whole
after disaster strikes.”
Tony Kuczinski
Former CEO
Munich Re US P&C Cos.
while becoming more innovative, agile, client-
focused and responsive to industry and client
needs.
When I took over as CEO for Munich Re
in the U.S., our business was in a turnaround
scenario, and we were in this turnaround mode
for about the next two years. Most of the business
was reinsurance and, of that reinsurance, our
distribution was predominantly direct. We
intentionally shifted our reinsurance model to be
distribution-channel neutral, which in turn shifted
our business away from the direct channel toward
the broker channel. This was not easy or popular
in the short term—either internally or with the
brokers themselves—but ultimately proved to be
the right decision.
What about the changes in climate and
various catastrophic incidents that have
occurred in recent years?
I look at the role the insurance industry can
play in two distinct ways. First, as individual
companies, we should be responsible corporate
citizens, committed to reducing emissions and
limiting global warming. We have to practice what
we preach. Second, as we not only manage but
also help to prevent and mitigate risk, insurance
companies have to do a better job of speaking
as an industry—raising our collective voice—to
increase understanding of the extreme financial
costs involved in providing post-event coverage for
these rapidly evolving risks.
To date, the industry has done an excellent job
of fulfilling our promise to bring people, businesses
and communities from harmed to whole after
disaster strikes. For the most part, the industry
responds quickly and responsibly to these events.
As an industry, we are currently meeting the
financial obligations when claims are presented,
but I don’t think we have been proactive enough
in adjusting pricing for these increased exposures
or in driving needed change in resiliency around
the globe.
Of course, the insurance industry has a role
to play in preparing for and managing the risks
associated with climate change, but it can’t solve
the problems by itself. No matter what steps we
take as an industry, many other sectors need to be
involved. The insurance industry should be seeking
out various like-minded parties to develop more
public-private partnerships, implement community-
based solutions and generally raise awareness
of the need for rapid, joint action to address the
serious risks posed by climate change.
In terms of infrastructure, specifically,
governments must prioritize this issue in order
to ensure that everything, from roads to dams to
electric power grids, is resilient to climate change
and natural disasters. As governments consider
new spending, enduring resilience should be an
essential component of all such projects.
What do you see as the most crucial
challenges facing the industry and what are
some potential solutions?
Systemic risk and cascading risk, particularly
as they relate to cyber and natural catastrophe
exposures. Many solutions require insurance
companies to work collectively. I think it is
important to acknowledge that ours is a very
competitive business. However, competition
notwithstanding, there are effective ways that we
can respond to some of these issues if we speak as
an industry rather than individual companies.
BR
BEST’S REVIEW • MARCH 2023
31

Post-Pandemic Commercial

Real Estate Investments Shift

Changes in the way people work and shop have prompted insurers
to choose multifamily housing and industrial properties over the
traditional asset classes of retail and office space.
by Terrence Dopp
G
reg Michaud has an admittedly unscientific yet simple way to describe what happened to
the commercial real estate investment market at the end of 2022.
“It just froze,” said Michaud, head of real estate finance at Voya Investment Management.
He said his team did about $3 billion of business in the first six months of
Terrence Dopp
is a senior associate editor. He can be reached
at
terry.dopp@ambest.com
.
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Asset Management
mailto:terry.dopp@ambest.com
the year, followed by about $500 million in the
second half.
“I’ve never seen a year that’s been that volatile,”
he said. “We were probably signing up or looking
at 12 deals a week, down to zero deals a week for
a couple of months when just nothing was coming
into the office. The market absolutely just froze.”
The COVID-19 pandemic, coupled with rising
interest rates, triggered a fundamental shift in
the market, specifically as to how insurers view
commercial real estate investments and which classes
attract the most interest. Carriers entered 2023
with money to deploy but were waiting for rates to
stabilize before making decisions.
“Ultimately, the returns and expectations
have to be adjusted by the market participants,”
said Bill Petak, chief executive officer of Nassau
CorAmerica, a real estate investment management
firm with insurance clients as a focus. “Until there’s
a recalibration of the wide bid-ask spread, which is
driven by interest rates and the related cost of debt,
the market transition activity will be slow. But at
the same time, funds have to put their money out
and insurance companies have to deploy capital.
Each one picks their safe spot to do it.”
Commercial real estate breaks down along four
broad lines: retail, industrial such as warehouses,
multifamily housing such as large apartment
buildings, and office. While life insurers traditionally
have found steady returns across all four lines, the
industry is seeing a shift in its segments.
“Insurers have been moving away from office
and retail for a number of years now, focused
more on multifamily and industrial,” said Jason
Hopper, AM Best associate director. “The pandemic
exacerbated that. I don’t think, for either of those
types of properties, insurers would suddenly have a
change of heart. The downward trend in appetite is
Key Points
Challenges:
The COVID-19 pandemic shifted work
patterns, making remote work more common and
complicating the office space component of the
commercial real estate investment market.
Shifts:
Insurers now are focused more on multifamily
and industrial properties, said Jason Hopper, AM Best
associate director.
Bright Spots:
Well-located and functional industrial- and
distribution-related assets are growing and will continue in
importance, said Bill Petak of Nassau CorAmerica.
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