In these CEO Connect messages, Ty Birkett provides an oversight of high-level issues and developments.
2020 is well and truly underway and I wanted to provide an update from Unimutual. My last CEO Connect did mention the increased risks of summer – but the bushfires, storms, and now floods have significantly impacted many people since then.
I’ll touch on the impact of these below, as well as the even bigger disruption for Members – the spread of the Coronavirus and associated quarantines and travel bans.
And finally, what does all this mean for the insurance market and your cover?
The situation is fluid and the extent of the effects is unknown. At the time of writing, close to 40,000 people are believed to be infected in 24 countries – and the over 800 deaths have already exceeded those from SARS in 2003.
Beyond the health risk, the global economy is being impacted by quarantine requirements, borders being closed, and travel bans.
The Australian higher education sector has been significantly impacted and will continue to be for some time. For our Members that teach or accommodate students, this is very challenging timing – particularly as it comes just as students are returning for a new year or commencing their studies in Australia for the first time. Our Members are tackling the challenge with a range of approaches including deferral options, delayed starts and online facilities.
We have been asked about whether Unimutual protections are triggered by such an event. The systemic and unknown nature of infectious diseases means that it is excluded from most insurance and reinsurance contracts, including those held by Unimutual. Two main reasons for a total exclusion are the difficulty in quantifying losses and the desire that it be covered under a specific policy (the analogy would be Motor Vehicle losses are intended for Motor Vehicle covers not Professional Indemnity).
The exception is if a Member’s premises are closed by a Public Authority as the result of an outbreak of notifiable human infectious or contagious disease at the Member’s premises.
We continue to discuss with Members and the Unimutual Technical Committee. Any questions around coverage, please let us know.
Our template Pandemic Management Plan (PMP) document is a resource that can assist with preparing and implementing appropriate policies and procedures. This plan is supplementary to your Crisis Management and Disaster Recovery Plan. The PMP details the processes and resources required to continue delivery of critical business functions, meet various obligations and deliver a satisfactory level of service.
Previous significant bushfire events have generally been associated with single short periods of terror (Ash Wednesday in February 1983, Black Saturday in February 2009), so it is telling that the recent events are now simply being dubbed as Black Summer. Lives and communities have been seriously impacted and it will take many years to recover. Political debate has been at times toxic. From an insurance perspective, total losses could be in the order of $2.5bn to $3bn or beyond.
The storms from 20-22 January brought significant hail that managed to seriously impact Canberra but was also sufficiently widespread to affect parts of Sydney and Melbourne. It is expected that losses for the insurance industry could exceed $1.5bn.
The last week has seen a cyclone cross the Western Australia coast, as well as significant rainfall up and down the east coast which in some cases has resulted in evacuations due to flooding.
With 56 Members and $65bn of assets protected, this has of course touched the Mutual with a number of our Members impacted over the summer. All our Members were fortunate not to be impacted by the bushfires, but some have not been so lucky with the hail which has caused significant damage in places. We are working with these Members, the loss assessors, and our reinsurers to assess and repair the damage.
For more on bushfire and flood risks, see our latest article listing our recommendations and resources.
As a member-owned organisation, Unimutual has control over how it prices the risk it retains; but it is still dependent on market conditions for the risk that is reinsured.
In previous communications, we have spoken about the challenges faced by our reinsurers after a number of years of losses, strong rectification actions by Lloyds of London, and steadily reducing capacity. Head offices are looking closely at their strategies in territories such as Australia and underwriters are being judged purely on profitability rather than growth.
Even before the summer, the expectation coming into 2020 was more upward pressure on contribution rates driven again by reinsurance costs. The significant losses to the market in Australia from the natural peril events over summer will put even more upward pressure on costs as concern grows about for the level of risk in this part of the world.
Unimutual will continue to look at ways we can maintain the comprehensive level of cover provided – particularly at a time where our Members are facing such a wide range of external challenges. It will be another challenging year, but at this stage I want to flag both the expected pressures, and also our commitment to continuing to communicate market developments to you throughout the year.
Looking forward to catching up and working with everyone in 2020. If there are any concerns or issues you wish to discuss, please reach out to myself or any of the team.
Unimutual was established in 1989 in a challenging insurance and reinsurance market that was looking to restrict cover (sound familiar?). The first risks commenced on 1 January 1990, so it is very exciting to reach 30 years of Unimutual existence.
A feature of all thirty years has been the Annual Conference and this year will be no different. We are looking forward to an exciting event at Riley Crystalbrook Resort, Cairns on September 9-11. The team look forward to trying to emulate last year’s effort for such a significant milestone event.
Chief Executive Officer, Regis Mutual Management Ltd