Sonal Shah meets up with John Fitzpatrick, secretary-general of insurance economics think tank the Geneva Association, to gain a closer understanding of the association, its work and its ambitions for the future
What are the key objectives of the Geneva Association?
The Geneva Association (GA) is the leading international insurance think tank for strategically important insurance and risk management issues. It identifies fundamental trends and strategic issues, where insurance plays a substantial role or which influence the insurance sector. The Geneva Association membership comprises a statutory maximum of 90 chief executive officers (CEOs) from the world's top insurance and reinsurance companies. Its members have total assets of more than US$11.7tn, are headquartered in 27 countries around the world and employ more than 2 million people who serve customers in more than 140 countries.
Please describe the opportunities that the GA offers to its members
It's a very exciting organisation owing to the seniority of its membership. For example, at the annual general assembly (AGM) in London in June 2013, we had 60 chief executives around the table meeting regulators, senior politicians and central bankers for discussions on the economy, legislation and other issues that affect the insurance industry.
There are two key aspects of the association that our members seek and enjoy. First, with only CEOs as members, it allows industry leaders of both large and small companies to network and meet one another on equal terms, without distractions. The AGM is the main occasion for this, but others such as our annual Insurance and Finance Seminar also provide opportunities to meet other C-suite industry executives.
Second, we organise international expert networks and manage discussion platforms for the senior insurance executives and specialists of our members' companies and provide an interface with policymakers, regulators and multilateral organisations.
Does the GA focus on Switzerland or reach out into the international arena?
The Geneva Association is very much a global organisation. As our members come from 27 different countries, we are far from being a solely Swiss or indeed European organisation. The chairman is from the US, as am I, although I have spent a large part of my career in Europe.
What are the three most important research topics for the GA?
Financial stability, climate risks and ageing populations. Since the financial crisis erupted in 2008, policymakers around the world have been working on improving oversight of financial markets. The insurance sector has, rightly, been an area that they have been looking at. We support the G20-led efforts to tackle systemic risk in the financial system. However, any regulations imposed on insurance companies must be appropriate to address the risk presented and not affect the balance of insurance markets and the business of insurance unnecessarily. Over the past four years, we have produced research and analysis to support regulators in their understanding of the insurance industry and pursued an intensive dialogue with regulators, supervisors, central bankers and the insurance industry.
Second, we are interested in natural catastrophe risks, principally climate risks but also disaster risks as a whole. It is a fact that disasters are happening more often and they are causing bigger losses. Populations are growing rapidly and urban areas have grown enormously, concentrating economic risks. The value of the property that we own and the value of our possessions continue to increase rapidly. At our AGM we launched our most recent report, Insurers' Contributions to Disaster Reduction - a Series of Case Studies, which provides an analysis of the ways in which governments and insurers can and do collaborate in mitigating the effects of catastrophes. The concept was developed as part of our ongoing dialogue with the United Nations International Strategy for Disaster Reduction (UNISDR). Margareta Wahlström, United Nations special representative of the Secretary-General for disaster risk reduction, joined us for the conference. A video of the meeting is now available on our website www.genevaassociation.org/
Although the financial impact of a major disaster is clearly noticeable in developed countries, an exceptional economic boom - driven above all by reconstruction - can quickly revive the slump in economic performance. Insurance plays a significant part in this resilience. As an example, in Japan, after the 2011 earthquake and tsunami, some 90% of the US$38.5bn of insured losses was paid within three months of the disaster.
By creating an environment in which insurance can work efficiently, governments have the opportunity to share risk effectively with the private sector. That takes the potential cost of disasters away from their own economy and spreads it around the world through insurance and reinsurance. We are working hard to raise this issue with our governmental counterparts to aid progress.
Lastly, we are looking at the implications of ageing populations. Increasing life expectancy and falling fertility rates are creating a demographic situation that has become one of the greatest economic and societal challenges of the 21st century. Funding these longer lives will become increasingly difficult under current schemes. The sustainability of public and corporate pension schemes is also at risk - the cost of funding state pension benefits is set to rise dramatically - by more than double in some countries. This poses a considerable political and economic dilemma about how to keep the burden on the working population bearable while not sacrificing the standard of living for those drawing pensions.
Against this backdrop, governments and employers tend to shift responsibility for old-age security to individuals. The financial crisis has accelerated this. Insurers can make a meaningful contribution to old-age security if a conducive legal and regulatory framework is in place, devising innovative solutions for the broadest possible spectrum of society. We aim to foster a better collaboration between insurers and governments on this issue.
Tell us about the GA's conferences
We run a series of conferences, approximately 20 per year, on the issues that I've just mentioned. They are increasingly seen as a forum for discussion of insurance issues and challenges. We are finding it necessary to limit attendance to keep the discussion at an effective level.
What would you see as the GA's greatest achievement or influence to date?
The association has achieved a lot in recent years. In particular, we have made a significant difference to discussions between the insurance industry and the regulators in dealing with systemic risk. The work of regulators has required a broad overview of our industry, tackling misconceptions and educating regulators whose experience is primarily in banking about the role of insurance in the financial system at an international level. Our work has been well received by regulators and has helped in a series of areas: to decouple the regulatory process for insurance from that of banking;
to encourage acceptance that core insurance activities do not create systemic risks; and to lead regulators to focus on activities rather than on institutions themselves.
What are the GA's main challenges?
The global issues faced by the insurance industry - changes in regulation that may unnecessarily affect the way insurers do business, and the dual challenges of ageing populations and climate risks.
From an operational perspective we are a relatively small organisation and, like most, could always do with more resources.
What are the main differences you have found between working overseas and in the UK?
I've worked in Europe, the UK and the US. They each have their own characteristics and merits. I can't say I have a favourite, but it has been a pleasure to work within a broad range of cultures and styles.