Issues & Answers Special Advertising Section:
July 2021
Chris Sparro
CEO U.S. Insurance
Sompo International
“Dislocation is providing Sompo International with opportunities to invest and grow our diversified book of business.”
The specialty market and product areas continue to evolve as the result of a variety of things, some of which are directly related to the pandemic. But more importantly is also related to the fact that over the past 10 to 15 years we experienced a softening marketplace and as the impact of the marketplace continued to soften, particularly around our long-tail lines of business, a lot of carriers began to shift from more traditional property and casualty products into more of the specialty products. Over the past 18 months, insurance carriers in a hardening market were looking to grow a diversified portfolio, moved away from some of the more typical property/casualty risks associated with natural catastrophe events and shifted their focus to specialty markets and products.
What do you see as possible emerging risks?One emerging risk is the transition back into the new normal for society. What will that new economic normal look like? In the U.S., some of the efforts and programs coming out of the new administration under President Biden with respect to government programs, expansion of infrastructure and climate change policy, will generate new risks. From an insurance perspective, as activity starts to increase within these areas, there will be legislative, regulatory and legal implications that could create emerging risk that carriers will have to take a long, hard look at and evaluate.
Are you seeing opportunity amid these market conditions?
Like most carriers, we are seeing many opportunities. What’s unique about the marketplace right now is the current trends and very firm market allow us to implement an underwriting strategy that will be successful for years to come. As carriers implement that new strategy, that creates market dislocation, providing opportunity for companies to execute their plan.
What should we expect out of specialty as we emerge from the pandemic?
As mentioned above, there will be a greater shift toward specialty products as we move forward. Specialty products are generally the first wave of product coverages that evolve out of new, emerging risks. They typically are introduced in nonstandard markets and they tend to be more short tail in nature at inception, so it’s an easy entry for those who are willing to assume the underwriting risk with that said risk. Depending on appetite, the opportunity to introduce new products and build new relationships is clearly possible within the specialty market segment. As we’ve seen over the past 20 years, through major changes in world events, the specialty market space has continued to change and grow at a faster rate than the traditional retail marketplace. There is opportunity for carriers to continue to distinguish themselves, as well as distribution partners in many ways, to bring the solutions to the needs of the customers that are looking for ways to mitigate risk.