< Regulars | 05.05.2017 |

Creating sustainability – Stephen Catlin

Creating sustainability – Stephen Catlin

Industry heavyweight Stephen Catlin talks to The Journal about his work with the Insurance Development Forum and a new book aimed at attracting young talent.

Stephen Catlin hesitates as he recounts that he first started out in the insurance profession almost 45 years ago. “Maybe that’s a fact I shouldn’t admit so readily,” he laughs. But in truth, Mr Catlin’s biggest ambitions still lie ahead of him as he now chairs the Insurance Development Forum (IDF), a global partnership led by the insurance industry and supported by international organisations.

“The challenge we have set ourselves is to get 400 million extra insurance policyholders around the world by 2020 – quite a high hurdle.”

His role at XL Catlin is now mainly behind the scenes, “helping to steer the ship”, as he puts it. Still a vital part of the management team and strategy council, the last two years have been heavily spent ensuring the integration between XL Group and Catlin Group has been successful.

BUILDING RESILIENCE

However, it is Mr Catlin’s involvement with the IDF since its formation in April last year that has really demanded his attention. A forum that includes the United Nations and the World Bank Group, the IDF aims to incorporate insurance industry risk measurement knowhow into existing governmental disaster risk reduction and resilience frameworks; and to build a more resilient global insurance market in a world facing growing natural disaster and climate risk.

“It is all about creating sustainability and we are really working on two fronts: microinsurance and closing the protection gap. There is very clear evidence that when you have an existential loss, the higher the percentage of the economic loss that is insured, the quicker the economic recovery, the less human deprivation and the lower cost to the tax payer. So there’s not much not to like!

“At present, you would be amazed by how little of the economic loss is insured, the average being only around 35% globally.” He points to places like Haiti, where insurance penetration is less than 1% and Italy which is at around 15%.

“If you were to look at the insured values in California for an earthquake, it is at less than 10% of the property value. So there are massive holes. And if it’s a one in 50- or 100-year event, politicians don’t concern themselves with the issue because they simply don’t want to spend the money.”

The IDF highlights how emerging nations tend to be the least well-protected and often have an infrastructure that is least appropriate for the potential exposure they have to risk.

The aim is therefore to increase the risk transfer, but also to improve risk mitigation and by doing so, save lives, he said.

“One of the problems of an individual broking house or carrier approaching a government and trying to offer them help is they immediately assume you’re picking their pockets. If we can go in speaking on behalf of the profession and assure them this is about societal value, we can make some real headway.”

TECHNOLOGICAL ADVANCES

Mr Catlin has certainly seen the industry change throughout his career and particularly in terms of technology; the past ten years have seen huge progress in risk modelling and the understanding of risk. “We really have come a long way and the knowledge of risk and risk accumulations is far higher – that is truly a great thing. One of the ongoing challenges with modelling, however, is data input. ‘Garbage in, garbage out’.

“Models can be limited by their own capabilities and by the quality of data put into them. For example, in 2011 we had a tonne of losses and the models fell a long way short.”

“During the Japan earthquake, the tsunami – which caused most of the damage – wasn’t modelled, so again there was an understatement of loss. And even during the New Zealand earthquake, the area experienced liquifracture – meaning the substrate became unstable and buildings’ foundations were damaged – the loss ended up being four times what the model predicted. Models have an important role to play but they are by no means perfect.”

TALENT PIPELINE

Another key aspect that Mr Catlin feels the industry needs address is to attract more new talent at a younger age. “Professional development is extremely important. I’ve been in the market nearly 45 years and the standards of professionalism have gone up experientially. The thing people often don’t realise from outside of the industry is that it really is some place to be.

“We are just putting the finishing touches to a book on that very subject, which really gets to the heart of what insurance is, what it does and what it is really like to work in the insurance profession. School-leavers and undergraduates can pick it up and say, “wow, so that’s what that is all about”. Directors, regulators and brokers can all pick it up and get a real-life take on how the market actually works and how the constituent parts come together.

“It is an honest attempt to contextualise what the market is about in the real hope that we can encourage further talent.”

The insurance profession certainly is a big ship to steer, but with the high aspirations of the IDF and further focus on attracting talent into the industry, Mr Catlin is confident it is moving in the right direction.

STEPHEN CATLIN

Starting out: Beginning his insurance career in 1973 by joining BL Evens & Others on Syndicate 264 at Lloyd’s, Mr Catlin became deputy underwriter in 1982.

Moving on: He founded Catlin Underwriting Agencies Limited in 1984, was active underwriter until 2003 and a member of the Lloyd’s Franchise Board until 2006.

And today: He now chairs the IDF which focuses on risk understand; regulation, legislation and policy; risk sharing, transfer, response and resilience.

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