Good morning, and welcome to Swiss Re's Virtual Media Conference. My name is Elena Lobotyankova. I am Head of Swiss Re's Media Relations and Corporate Reporting. I'm joined here today by our Group Chief Underwriting Officer, Thierry Legere and our CEO of Reinsurance, Moses Adjusikova. They will first share with you a few thoughts about the current market environment, and then we would be happy to take your questions.
And with this, it is my pleasure to hand over to Thierry Leger.
Thank you, Helena, and good morning, ladies and gentlemen. On the back of several years of claims deterioration and premium declines, the situation for reinsurance for the reinsurance industry has gotten worse again in 2020. As a result of that, Swiss Re has decided to focus the renewals ahead on achieving underwriting technical profitability and clarity of terms and conditions. Let me go a little bit more into the details. 1 of the worsenings this year has been another decline in the already low interest rates.
As Swiss Re's Sigma study stated very recently, the low interest rate environment is here to stay for longer. And it might even get worse in the years to come. What you see on this slide is that the decline just of the first half year in 2020 has changed the loss ratio in, for example, casualty lines by 5%. This really means that the timid price increases we have seen have been offset by that further decline in interest rates. The second driver of worsening we have observed, also this one not new, social inflation.
So social inflation has been with us for decades already. And it goes in waves and it gets worse faster sometimes and sometimes less fast. And as you can see on this chart, it has gotten faster, worse again over the last few years. Social inflation is actually fueled by a general anti corporate environment. And this really pushes plaintiff powers to develop psychology based strategies to trigger juries.
As a result, we can see that particularly the higher plaintiffs' awards, those above €5,000,000 have been increasing at quite a rapid pace over the last years. And if you go beyond €100,000,000 those settlements above 100,000,000 in the 100,000,000 and or even 1,000,000,000, you can see an even stronger increase. So social inflation has been with us for many decades and is going to remain there and will have an impact on our casualty lines. The 3rd impact in 2020 very significant obviously is coming from the COVID-nineteen pandemic. Market estimations of the immediate impact related to COVID-nineteen are €50,000,000,000 to €80,000,000,000 in claims.
So far, the industry has booked only €20,000,000,000 So it looks like there is much more to come. And we are still in a very uncertain environment. As you can see on the charts, the death numbers are still increasing. We can read in the newspapers every day that infection rates are increasing. We also observe that whilst certain countries are still fighting the 1st wave, many other countries are now already fighting the 2nd wave.
We all wait for vaccines, but the uncertainty of when those vaccines will be available and whether those vaccines will be effective is still very high. So COVID-nineteen not only had a very large impact already, it's going to remain with us for quite a while. And last but not least, and also this trend, not a new trend. You can see on the left side the increase in very large nat cat events over the last decades. That is coming from a sigma study that is being published every year again.
The key drivers behind those increases are very clear. There are 2. So one is that more and more people are moving to areas where that are exposed to Nat Cat risks. And the second reason is that in those areas, a lot of wealth has been created in the last decades. And the 2 together actually have been the key drivers behind that increase that you can see on the chart on the left.
The chart in the middle is a very interesting one because actually what it shows is that the contribution of secondary perils to the overall Nat Cat claims has been around 50% for the last years. And we all know and Swiss Re knows that some of those secondary perils, bushfires, wildfires, as just one example, have been or are being driven by climate change. So what we're actually seeing here on the mid chart is a impact of climate change, a real impact of climate change on the insurance industry. And unfortunately, as we all know, the world is finding it very difficult to tackle climate change, to take action to actually improve climate change. And therefore, we expect, at Swiss Re, that this trend of secondary tariffs becoming more and more important, driven by climate change, will be a continued trend and will get worse in the years to come.
And last but not least, obviously, in the U. S, we are still in the middle of the hurricane season that has been forecasted to be a not very good hurricane season. So there have been quite a few hurricanes already and we expect quite a few to come still. So very clearly, there have been increases in premiums observed. But as I told you before, they have been hard enough to actually offset the interest rate decline of the first half of the year this year.
Also these TINIT increases have by far not been able to compensate for many years of premium decline before. And they have in no way been able to compensate for the increased claims load that we are observing around us. As a result, we see a real need for strong price increases to get back to underwriting profits. Whilst we are tackling the immediate challenges and immediate priorities that we have today that we face today, Swiss Re Institute is spending time to understand what's going to impact us in the years to come. So we are spending considerable R and D in many different areas.
And I would like to mention just 3 of them today. 1 is in the property cat area. As you know, we have developed our own R and D team, our own tool. This tool allows us to stay in control of our Nat Cat underwriting. And it allows us to make our tools and knowledge available to our customers, who in turn can offer better products to their customers.
In liability casualty in general, we are researching what actually the underlying trends, the underlying causes and key risk drivers are behind casualty. I mentioned social inflation, but there are other ones. With this, we would like to put us in a better position to cost our risks. And again, here, enable our clients to cost their risks better and offer suitable products to their customer base. Last but not least, cyber.
In a world that is being more and more digitized, more and more connected, it is very clear that the exposure to cyber is increasing at a very fast pace. It is therefore very important for the insurance industry to find the right products and enough capacity to help and protect our clients. For this, we are increasing the R and D in the area every year more to better understand what cyber is today, what's going to drive it tomorrow, how to cost risk to ultimately be able to allocate more capacity with the rising demand in that space. Before handing over to Moses, I'll make an outlook or venture with an outlook on the industry. And you might be surprised after the first part of my speech that actually I have a very positive outlook on the industry.
Actually what we can see already today is that the economic recovery is happening after the COVID crisis. What we also see is that COVID has heightened the risk awareness of the clients out there of consumers and companies. So that heightened risk awareness will create more demand for insurance. And thirdly, we still observe a huge protection gap out there. And as measured by Swiss 3 Sigma every year, that protection gap is still growing and represents a major opportunity for those companies who are tackling the current challenges and are getting ready for the future to actually harvest the profitable opportunities that I see out there.
Moses, over to
you. Thank you very much, Thierry. So I'll take the next 10 minutes or so to go over the elements that Thierry spoke about that views of the industry, both in the short term and midterm, to translate those to how we then partner with our clients to ensure that they continue to be successful and what the specific solutions are that we can bring to ensure this. The first slide that I show just simply takes a look at Thierry mentioned the comments about coming back to underwriting and the fundamentals of underwriting ultimately, not just driven by COVID, but I think driven by a period of time, an extensive period of time of capital eroding or not generating the right returns in the industry. And from our own perspective, we see the opportunities to partner with our clients across the entire value chain.
On this slide, I focus on a series of elements of the value chain from the product design themselves to ensure that the products that are designed that we jointly design with our clients for their end consumers absolutely meets the customer needs. And once you've done that, you've also got to make sure that the underwriting and the pricing is secure from the standpoint of eliminating as much of the uncertainties that exist within those disciplines today. Pricing, we always know, will contain an element of uncertainty. But it's important to minimize that and ensure that whatever we define as the adequate price, working with the technical folks, that, that covers the majority of the exposure that you expect to write. And from an underwriting standpoint, we're thinking about the entire portfolio.
Thierry mentioned secondary perils. Amongst other things, we know that the rates and pace at which we see events across the entire world is moving at a faster pace. And as such, the models that we use to calibrate these exposures need to also react. They shouldn't be static. So the more frequent updates of such models, our own proprietary model, we update them much more frequently to eliminate uncertainties or at least to ensure that it provides the right level of guidance for our clients.
And lastly, on the wording themselves, which would encapsulate the relationship that you have with your clients, we want to make sure that this has far greater certainty around it. How does this translate in the short and medium short term? I'll come back to medium term a bit later. It translates in the types of conversations we're having with our customers at this particular point, which focuses extremely strongly on their financial stability and resilience. And this comes in the form of looking for protection from an earnings standpoint.
The volatility of recent events means that they want greater stability on the earnings. And from a capital standpoint, making sure that it's adequate, which by shoring up the balance sheet of clients and also the composition of their portfolio itself, making sure that's optimal. And for each of these requests and each of these situations that our clients have, we have solutions. We have the capability. We have the knowledge.
We also have the capacity to ensure we come alongside them. But as articulated a bit earlier by Thierry, this has to be done in a way that ensures that we have adequate pricing, not just putting out the capacity out there. Now some of the challenges that the insurance industry faces is not germane to the insurance industry itself. It's broader. And we see that clearly in last year, at the same time, we talked about the resilience index indices that we launched, and we measure that.
And when we look at the resilience indices, both from a macro standpoint as well as from an insurance risk standpoint, we clearly see a deterioration compared to last year. For the macro resilience index, that's down almost 20%, which is measured by the absence of flexibility from both a monetary as well as a fiscal basis by governments around the entire world, because they've had to respond to a crisis. And that just means that there's less firepower to respond in the future. The same exact thing happens for the various insurance indices as well. If we move more beyond the short term towards the midterm, the resilience the erosion of resilience index that I mentioned a bit earlier translates to a much larger protection gap.
When we look at the protection gap we've measured this year, we sit stands at about $1,200,000,000,000 for the 3 main risk pools, being mortality, nat cat as well as health care spending. And for each of these things, we are working together with our clients to ensure that we put in place solutions for clients, for individuals as well as for societies. From a client standpoint, this comes in the form of their demand and their desire to grow their businesses more, to be much more profitable and to be much more efficient. And here, we have clear solutions that we've delivered for each of those clients. And if you look at it from an individual standpoint, it is how do we ensure that the buying process for insurance and the entire engagement, the entire journey that they go through, the affordability, all of those elements that we address to ensure that there's greater penetration, which ultimately ends up with a reduction in the protection gap here.
It's great that there's greater awareness, but we must capitalize on that awareness to ensure that we actually ensure that more people are buying products. And the same exact thing applies to societies themselves. I'll just go through 2 quick examples of solutions that we deploy. 1 is on the P and C side. We call it P and C Analytics, where we come alongside our clients with very deep data as well as analytical capabilities to look at their respective portfolios and situations to address a particular problem that they have.
Some of these solutions are done on a bespoke basis because the situation is specific to that client. But we also have platform solutions that allows us to deploy the solutions to much broader set of customers. And there are 3 examples that are on the slide here that I gave, which focus on helping increase premium growth, improving the efficiency of underwriting as well as ultimately reducing our loss ratios for clients. In the case of Helping Grow is a specific client for a European client in a country in Europe trying to focus on the SME segment and the entire go to market strategy, including how they engage their traditional distribution as well as building a digital distribution for them with solutions that we're able to bring to that client to ensure that at the end of the day, they were able to grow their portfolio by 10%. And in the case of underwriting efficiency, this was bringing our underwriting platform, which took away the individual decision making, which was inconsistent from one country to another.
For this particular client, it was over 26 different countries, and that reduced the on the writing components or the efficiency of it by almost 95%. And for the loss ratio piece, that was for particular clients where they had a problematic portfolio. We came alongside them. And with the deep insights that we were able to bring from our data using external data together with theirs, we ultimately helped improve the portfolio performance by 6 percentage points. And the last solution I will talk about is IptiQ, which is our white labeled digital platform, B2B2C.
We say B2B2C because the clients that we have ultimately have customers that they are able to that we're able to work with them to reach. And we have an entire solution that we've been able to put in place. And our customers, in this case, are insurance companies and other companies that have a significant number of customers that they want to deploy insurance products to at the end of the day. We've been able to build solutions that we can deploy rapidly. In this case, less around 60 days, we can deploy solutions.
Or the number of countries in which we the solutions are available are now at 10 and increasing. The solutions are both in P and C as well as in life and health. And we can reach a large number of customers. Ultimately, here, our customers are looking to either enter new markets, new countries, new lines of business and do not quite have either the expertise nor willing to make the relevant investments to allow them to fulfill that goal and we're able to come alongside those customers. So those are two examples of what we can do as Swiss Re to come alongside our customers to help them grow their business.
I'll conclude here by talking about 2 things primarily. 1, our clear view that prices need to continue to increase, driven by real risks, not just phantom risk. We've seen them. We've seen that the industry was not quite performing at the level that it needed to in terms of return on capital. And if you add the additional components that have come on, it just calls for the fact that rates need to continue to increase.
The second element I want to talk about is we clearly see opportunity for growth. Some of it is driven by recovery from the crisis, but much more than that, we see exposure growing everywhere around the world, both on the life as well as on the non life side. And we think this portends well for the insurance and reinsurance industry. So with this, I will stop the formal presentation here, and we'll go to your questions.
Thank you very much, Moses. Thank you very much, Thierry. We will start the Q and A session now. We already have received quite a few questions in the chat. Thank you very much.
And just a reminder, if you have any additional questions, just post them in the chat and they will come straight to me. So the first question is from Johannes Brinkman at AWP. He's asking, do you already have loss estimates for the Esaias and Laura? Very easy to start.
I think that's an easy one, Thierry can jump in. I mean we are forming estimates at this particular point. We have people on the ground getting a good sense of what happened in Beirut, but we are not at a point where we're willing to put out a specific estimate. And the same exact thing will happen to I think the fires in California are still raging at this particular moment. So I think it will be completely inappropriate to say there is an estimate that we attach to those fires already.
Same exact thing happens to the other two events. So LoRa, it's fairly recent. I think we need a little bit of time. We've seen some of the estimates that others have put out. But we tend to be we deliberate.
We want to make sure that our views are driven by informed by actual information that we have rather than making assumptions. So we don't have any estimates that we're putting out at this moment. Is there anything else you wanted to add?
I don't think there's much I can add, Moses.
Okay. The next question comes from Oliver Ralf at the Financial Times. Does it matter that the reinsurance industry is not meeting in Monte Carlo this year? Should the industry return there in the future?
Maybe I leave you to answer this one first or give your views.
The Chief Underwriting Officer is such a question. That's been in Monte Carlo before. So I think what we have in Monte Carlo is this formal and informal way of interaction. It's through 3, 4 days. It's extremely intense interactions that you cannot have in a virtual way.
I do believe, however, that with the way we organize the virtual Monte Carlo this way that high quality of interaction will be possible. And I'm absolutely sure that because we're in a B2B world that the outcome will be a very positive one. Not ideal though, Moses, I assume.
Yes. I mean, I think Thierry said it best, right? I mean, from our standpoint, does it matter this year? No, it doesn't. In the context of everything else that's happening in the world, I think not meeting in Monte Carlo is the list of issues that we should worry about.
In the future, I think Terry said, I mean, our industry is one that is built on relationships. And those relationships are important. I think in the future, we need to question whether we need Monte Carlo in its full scale or whether it's a version of it. But I think the interaction, the networking, the informal component is clearly important. And we have to find a way to replicate elements of that, while also taking advantage that we're not spending as much money as we ordinarily would have done this year, would be my view.
The next question is from Werner Ents of The Entsertet. You expect price increases across all lines. Why are prices for motor insurance expected to go up while excellent numbers clearly are falling due to the COVID-nineteen impact? Same applies probably to casualty insurance.
So on the motor side, it's very clear that with the COVID lockdown, there has been less people driving. And therefore, certainly, the claims trend has been trending down and led to an improvement on that side. But as the industry recovers, as the economy recovers, people start to travel again, probably more than ever avoiding public transport. We think that our prediction is that people will probably use the cars more than ever. And we will go back to the levels we have observed in claims on the motor side very fast.
What we've also seen is that on the one side, we have more and more security features in the cars, which is positive, which means less claims. But we have also seen that even benign claims are getting very expensive just because we have connected all pieces of a car. And when there is a loss to one of those parts, to replace it is not as easy as it was and not as cheap as it was in the past. So those two trends, more security against much higher claims, are netting each other off, sometimes more, sometimes less. What we have observed so far is actually a tendency to more claims and more costly claims, probably also driven by a habit that consumers have, which is to read their mobile phones during driving, which obviously is very dangerous and leads to terrible accidents.
So in the most alliance, I cannot see therefore why there would be in the midterm premiums. On the casualty lines, there is no such thing like a decline, observable. So these claims have continued to move upwards. Again, I have mentioned social inflation, but there are many other trends that influence the casualty claims negatively. And certainly, this is not the time to reduce, but to increase the premiums.
We can go to the next one and nothing else to add. All
right. The next question comes from Gershen Zeitung. Is the market hardening? Or do we already have a hard market also beyond 2021?
Maybe I take this, Thierry. To me, this is semantics, yes, personally. It's semantics. Is it hard or is it hardening? Think at the end of the day, the big question mark is when you look at risk, the risk that you take on, do we have sufficient pricing to cover the exposure that's taken on?
And I think across most lines, Thierry gave significant evidence earlier as to why we do not quite feel that pricing is at a point where it covers exposure. So until you do that, certainly from our own perspective, we feel rates need to go up. Whether it's hardening or hard, the honest truth is, from my perspective, I don't see that as a point of debate. The point of debate is whether prices cover risk because ultimately, you need that in the long term to have an industry that's sustainable. If you don't have that, then you'll end up for an industry that customers rely on heavily that somehow it's not as strong as it should be.
So we need an industry that's sustainable. And for that to happen, we need to make sure that we attach the right price to the right risk and the right exposure. Would you
agree, Moses? And if we define soft and hard markets, in the way where we say soft market is times when we do not cover our margins And hard markets where we actually overcompensate on the profit side to compensate for those soft markets, then it would be in a hard market, it would be one where we more than cover our required returns. And for sure, at the point we stand today, we are not at that level. Whether you call that a hard market or not, but that's not the level we have achieved yet. I refer to timid price increases so far, so we are very much on the reinsurance side at the beginning of hopefully longer trend.
Thank you. The next question comes from Paul Walsh at Insurance Can you provide an update on Swiss Re's own losses from COVID-nineteen? What do you classify as the key emerging risks for the reinsurance sector such as climate, cyber, etcetera? Two questions in one.
On the losses from COVID-nineteen, I think we published that with our Q2 results. There's no update beyond what we published in our Q2 results. For emerging risk?
The emerging risks, I mentioned some of them in the speech I had at the beginning. So it's very clear that there are big emerging risks out there. And I think cyber is still a very emerging risk. It's an area that sees very strong growth, 20%, 30% each year from a low basis. Of course, that's a risk that's going to grow at a very rapid pace in the years to come, again fueled by the digitization of the world around us.
So that's certainly one big risk trend that we are seeing. I mentioned climate change and the impact it has on secondary barriers such as wildfires, bushfires. We have seen the impact of that now completely in our results, and that trend will worsen in the years to come. In general, I see a trend to more and more intangible values being created in the industry. And therefore, as the insurance industry will start or continue and increase its exposures to covering intangible value creation, it will obviously trend to much higher losses coming from those spaces.
And that's very much driven again with a world that moves to services by a world that is much more digital today. So the coverage, the claims from intangibles will increase as a megatrend in the decades to come.
Can I just add a couple of quick things to what Thierry said? So clearly, we're living in one such you don't quite call it emerging, maybe it's more awareness. So the whole topic of pandemics, as an example, is one that I think we need to pay a whole lot more attention to and work together with governments to ensure we have sustainable solutions at the end of the day. We also look at the interconnectedness that Thierry talked about in digitization. There's an element around supply chain.
And when you talk about the globalization and the impact that, that creates and the risk that also comes alongside that. So those are just 2 additional things that I will expand on in the context of what Thierry mentioned.
Thank you both. The next question comes from JPR IFAX. We are returning to our expectations for price increases. Can you give us some figures on how strong you think the increases will be and in which segments you expect
I can tell you, I mean, from my standpoint, we tend to prefer for these discussions to be had bilaterally with our clients. I think most of our clients because not every single client is caught exactly the same way. Yes, we look at the aggregate expectations on rates on certain lines of business, and we call those out on certain lines of business. And but they're different from one client in one country and one market to another. So rather than put out figures that have wide ranges and yes, they may grab a headline, I think it's far better that we stick with the main comment, which is one that we expect prices to go up, and we'll have those discussions on a bilateral basis with each individual client.
Thank you. The next question is about pandemics. How are you preparing for future pandemics?
So future pandemics preparing for future pandemics is an important topic, but it's not a new topic for us. You can go back 10 years, 15 years, 20 years. And Swiss Re has developed pandemic model, for example, clear guidelines around pandemics and how to prepare for that. So to say that we are just starting to prepare for that now is not accurate. But of course, we have learned from this pandemic, from this crisis.
We have learned a lot. For example, Moses mentioned it, I mentioned it. We need more clarity on the coverage side. Terms have to be clearer with regard to pandemic, and we will do that in the renewals to come. Also, we view it as very important that pandemic as a peril will be more standardized within the claims modeling of our clients and of ourselves.
So that's something that will require a bit more time, but we are already on that journey.
Yes. If I could just add to what Thierry said. I mean, I think for extreme pandemics, as we found in this particular situation with COVID-nineteen, I think what is abundantly clear is when you look at the impact, the financial impact of a pandemic of this scale and you juxtapose that against the capitalization of the entire industry, it is extremely clear that the industry alone cannot pay for such events. I mean, so one critical component, I think, in preparation for the next event, clearly, is the public private partnership component in terms of how we work with governments to ensure that there's sufficient capacity to absorb the risk that ultimately comes. Now the industry itself has significant infrastructure that it can bring to bear in such instances, whether it's in the adjustments of claims or payment of claims working together with government.
But in terms of the financial impact coming out of a pandemic of this sort of nature, it is very, very clear that we've got to work with government. And we are already in discussions with governments across multiple countries, but this needs to take on a different pace to prepare for the next event.
Let's stay with the pandemics for a second. I think you've covered some of these aspects already. But the question is, what is the industry doing now to mitigate the effects of the COVID-nineteen pandemic? Perhaps you have something to add.
Should I start, Terry? I think a couple of things, I would say. I mean, I'll liberalize I'll take liberty and expand that question, right? So the first of them deals with how the industry itself is responding from an operational standpoint. And I think overall, the industry ought to be proud in terms of how it's responded.
I mean, almost moving to a digital or virtual platform almost overnight with hardly any impact on customers. And I think this is a really good thing and will have it will serve us well in subsequent events. If I then come back to the event itself, from certainly from our own standpoint, I think this issue around clarity of language, understanding what is actually included or not included and charging appropriately for them, understanding where it makes sense for standardization rather than everybody making their own policy wording bespoke, which then creates confusion. I think these are things that are super important in trying to make sure that we don't end up in this type of situation again as further down the road. I think some companies do it better than others, and the industry has responded well in a number of instances to ensure that we take care of customers.
So the question earlier around loss frequency in motor, I think that's a perfect example where the industry looks and said across multiple countries, people are not utilizing their cars because they're not utilizing it, exposure is down, it makes sense for us to rebate some of those premiums. And lots of countries that was done across multiple lines of business. So I feel the industry has responded appropriately in some cases, but we need to prepare better for the next time.
And I think, Moses, it's fair to say that the whole pandemic is still ongoing. And therefore, it is very important the way to exclude pandemic, to cover pandemic in a clear way or exclude it where it needs to be excluded, That's very important. You mentioned the public private partnership that is critical to actually create an environment in which the insurance industry is again able to cover its customers and there help the resilience of the global population to withstand such a pandemic.
The next question comes from Lucy Jones of Insurance Insider. She would like to ask what kind of rate rises are you seeing in the ILS space?
So the ILS space is always very interesting space for us. As you know, Swiss Re is a very active actor in the space. We do not use only ILS, of course, but also other means. So the ILS market has been going up and down a little bit with the crisis and also with the increase in the net cat losses that we have observed as a whole. So the price increases, we have seen Moses must be around 5 10
They're quite healthy, the price increases, I would say. I mean, depending on the areas that you cover, but I would say we've seen prices, if you take Florida as an example, price increases there were into the 20%, right? Much higher. So it ranges, but I would say healthy price increases in the ILS space overall. So the only other thing maybe to just add Thierry is another thing that I think is super important in the ILS space that we see also relates to this issue of wanting to make sure that there's clarity.
So in terms of the exclusions for pandemics, while before language was maybe not so clear, we've clearly seen a way both in the primary markets and the reinsurance markets and the ILS market of just trying to make sure that there's far greater certainty and clarity about coverage that's provided. That's the other trend I would say we see.
The next question comes from Ben Dyson of S&P Global. To what extent will the reputation damage suffered by the industry over denied COVID-nineteen business interruption claims dampen the demand for insurance?
Yes. I mean I think this is a it's a good question. I mean in my mind, I think it's I was on another panel a few days ago where we had a discussion about the industry's reputation. From my perspective, I don't think we should just take that as a given, yes, because there's a lot of very good things that I believe the industry did throughout this entire crisis, including I mentioned the whole premium rebates, extensions of coverages, where you didn't have the right infrastructure, still making sure that people had their renewals, things of that sort we did at the end of the day. So those are all things that are extremely positive.
I think the issues around the disputes from a claim standpoint, when you have the sort of financial impact that an event like this has had, it's inevitable that you have disputes and cases that need to be resolved. And I think when you look across the entire world, on balance, most of the judgments that are coming through have come on the side of the insurance companies. And this is what the insurance contract intended, and you just cannot liberalize it because you have an economic loss of some sort. So from my perspective, I think bringing this whole issue around contract certainty and making sure things are clear, making sure advisors let their customers know exactly what is covered. These are things that we need to just take lessons from this experience to ensure that it's done better in the future.
So around clarity, so that there's no confusion. The fact that you buy an insurance policy doesn't mean that you cover everything conceivable under the sun. That's just not possible. Nobody will be able to afford such a policy in the entire world. So knowing what the limitations are and making that clear, I think, is one thing that would definitely help from my perspective.
And I think it's very clear that in many policies there's been a creep from covering excluding entirely infectious diseases to covering the local salmonella driven infectious disease to epidemic. And then in some instances, maybe a little bit being unclear with regard to pandemic. But it has always been a challenge for the insurance industry to cover pandemic. So I find it very unfortunate that the insurance industry is actually suffering in its reputation from something that should have been clear, wasn't clear and therefore now needs to be addressed.
The next question is about the protection gap. And do you see the need for greater public private partnerships in the future to cover significant exposures, such as major catastrophes and any future pandemics?
Without a doubt. I think it's not just the capacity provision where we talk about public private partnerships. I think in things like pandemics, clearly, we feel that is important or in certain extreme risks, things like war the risk of war and you see things like terror pools and things being put in place. So from a capacity standpoint, I think it's important. But government and the public sector plays a significant role in lots of countries from the standpoint of combination of credibility and distribution of products, because they are able to reach people far more than the insurance industry and putting in place schemes that covers a large sort of people, which provides resilience to those individuals can, quite frankly, only be done by working together with government.
So we see a tremendous role for them, both from a capacity standpoint, but much more than that. From a distribution, from an education standpoint as well, I think the partnership with government is essential.
And in addition to what Moses just mentioned, I think we're talking about kind of a claims backstop from governments. But I think in addition to that, the insurance industry has more to offer. We can actually help in putting a price on the risk, which is very valuable. We can differentiate between better risks and not so good risk. We can help in claims management around, Nat Cat events, for example, helping the resilience of companies and people.
And of course, we are there when it's about settling claims. So there is a lot of valuable services we do offer in this public private partnership that's going to be very, very helpful and hopefully help this to cover certain difficult areas in the future in a more coherent and more reliable way.
The next question comes from El Bayan Magazine, and it's about the explosion in Beirut, which we talked briefly about at the beginning of the Q and A. Do you have a clear idea and perception about the damages of Beirut Port and the covered value? What are the covered and excluded damages? And also, will this explosion affect the conditions of treaties renewals and rates in Lebanon and the region?
So I take that question in 2 parts, right? I mean, the first part is the reality of the matter is, I mean, if you read the newspapers, I think just 2 days ago, I think HIT sensors sort of sense that there may have been movement in some of the rubble they checked, it wasn't. So I think a long about way of saying this is something that's still evolving, still being looked at and all the assessments that need to be done to try and get a good sense of exactly what the exposure is, that hasn't been done. And it will take months before that is done. So to now put an exact loss estimate on what's happening, I think, is completely premature, certainly from our own perspective.
As we enter the renewal period, January 1, clearly, for the underwriters, this will be a primal question for each of the clients that we're having discussions with to know what the exposure is, what that exposure was, why it was actually the case and whether there needs to be any adjustments from both the terms and conditions and from a pricing standpoint. This sort of like events, which are unexpected, unfortunately, we see more and more of them across the entire world. This one is unfortunate because you also have significant loss of life. And quite frankly, for something that was preventable in a sense, if you consider how long this material was stored and how many people knew about it before it then became the issue that it actually is today. So from a renewal standpoint, clearly, we consider it, but I think way too early to give any assessment on exactly what the loss estimate is.
The next question comes from Cover Africa. Reflecting on the business interruption challenges with the COVID pandemic, are you looking at cyber risk as a potential pandemic fallout?
As a pandemic fallout. Fallout. I guess it's is a cyber risk the next one.
Whether it's going to be impacted or so not by the pandemic directly, although we have seen an increase in claims due to the pandemic. We have seen more people working from home, the whole world being digitized and therefore, a huge increase in traffic in the digital environment. And of course, a lot of activity, criminal activity has been observed in that space to actually take advantage of that move, particularly in smaller companies that have been less prepared for such a movement. Private households have been obviously the aim of attacks. So that has and will have an impact more directly.
But in the longer term, to say that the pandemic will have an impact on cyber is probably overestimating the impact of the pandemic. Cyber will the exposure will increase. It's going to be a megatrend over the decades to come. Whether there is a pandemic or not, this is going to happen anyway.
We have a couple more questions about the pandemic. And a reminder, if you would like to ask a question, just post it in the chat. So first question, how pandemic how would pandemic impact Asian markets, particularly China and India?
Well, I can probably start, Thierry, and we come back. I mean, I think interestingly, if we look at the Asian markets and the pandemic, while both response by governments, the losses sustained from the pandemic itself in terms of the insured losses sustained from the pandemic itself. I think because Asia had gone through a series of other pandemic, if you take SARS or you take H1N1 and it mirrors some of the other elements that have happened. I think Asia was better prepared than some of the other regions in terms of government preparation. But also from an insurance standpoint, the language in contracts was clearer just because they had experienced some of this in the past.
So from our own perspective, this is what we need to see happen in some of the other regions because to me, one is the financial consequences and trying to repair those financial consequences. But almost more importantly is the level of preparation that you put in place to try to mitigate or reduce the impact in the first instance. And I think there are some significant lessons to learn from Asia. Now not all of it was gotten right. And we see that in the impact on the growth rates of the respective economies because once you shut down an economy, it has a significant impact at the end of the day.
So there's room for improvement. But I'd say Asia is probably a little bit further ahead than some of the other countries. I know the question was about China and India specifically, but I take the entire region in terms of my response.
And I think specifically to India and China, we can see differences within Asia as well. So clearly, China has been first, but also they have tackled the pandemic in a very resolute way. And then coming out of the pandemic lockdown first. And since we can really see the economic recovery of China happening in a very impressive way. India, they are still in the first wave.
They are still in the middle of the pandemic, and it will take more time to India to actually recover from it. And so the impact there on the economy is still more uncertain, and it's going to be longer for it to recover.
All right. Next question, how would the coronavirus affect electric vehicle market?
How would the coronavirus affect the electric vehicle market? I have to think about that, Thierry. It's not one that I
Very interesting question.
Prepared for. In my mind, I don't see why it should affect the electric vehicle market. I mean, I think the move towards sustainability, which electric vehicle sort of represents, I think that's a move that is absolutely necessary for the world overall. In Thierry's response and to the question around motor insurance and why perhaps premium shouldn't go down. I think if we see any trends around the world, it's more that people want to drive more.
And as a matter of fact, you go to some of the countries that started early and are out of the first wave, traffic measurement of traffic in some of those countries is actually higher than pre COVID at the end of the day. So we feel the demand. Certainly, I feel, this is not a house view, this is Moses' view. I feel the demand for automobiles will continue to increase. Even if more people work from home, I think more people want the security of wanting to drive their own vehicles.
So I don't see it affecting the demand for electric vehicle that much. Just my view and my response my reaction rather.
Yes. Remarkably enough, we have done some behavioral analysis on consumers and asked them about, amongst other electrical cars. And there seems to be with consumers when you as a private person, when we are under pressure and we have to fight all sorts of issues that some more, what I call, luxury things, such as buying an electrical car, become secondary in the face. So we think that right now as where we are, probably the interest for electrical cars is somewhat dampened. We still increased, but it's somewhat dampened.
But that's more of a short term impact. We really expect that to reverse as soon as the pandemic is over.
I think the consumers also say the same issue. Just simply go buy the price of Tesla's shares, right?
We have, I think, one last question for now. It's a clarification question from Cabo Africa about the cyber market. And so he Tony actually wanted to ask if we are looking at cyber as a potential pandemic or a single mass global event. So is this kind of a potential systemic event such as pandemics?
Yes. And actually, we do. So there is a clear parallel between a pandemic and other events, such as cyber that has huge accumulation potential. So not the same trigger. It's not the same way it acts, but actually cyber does have this potential for very uncontrolled, very large accommodations across the world, across industries, private and commercial businesses.
It can lead to major lockdowns due to power shortages. So cyber has the potential to be a major disruptor. In my personal view, it has the potential to be worse even than a pandemic.
All right. Thank you. It doesn't seem like we have any more questions. So thank you very much both to you. And thank you very much to our audience for joining us today.
Have a wonderful day.
Thank you very much. Thank you.