HDI Insights Dec 2023 Ed.10 HDI Asia Pacific Newsletter
December 2023 | Edition 10 3 5 6 7 11 17 19 20 21 25 Foreword - Stefan Feldmann Hello from Hong Kong - Daniel Lau Hello from Singapore - Graham Silton Claims; it’s where the trust has to be HDInsight LIVE: Liability Asia Pacific - Trends and Opportunities Mid-Market, the engine room of the economy Another El Niño Event Needs Early Preparation HDI Global appoints Cristiano Pizzocheri The thrills of risk engineering between propeller planes and snakes Getting back to international business with HDI Contents
HDI Australia It was our pleasure to welcome to our Australia offices HDI head of global risk underwriting digital solutions Mereym Seyyar. This liability underwriting product is aimed at companies with innovative digital business models as well as industrial clients who bring product innovations to the market. Whether its micromobility, autonomous driving, sharing economies or any kind of innovative technology such as virtual payment systems, this trend poses new operational risks which require innovative tailored insurance solutions. It was great to share knowledge with the team and our growing success in this market. HDI were delighted to sponsor the Aon Leadership and Growth conference in August which brought over 200 of our broker partners together with a focus on delivering exceptional advice, driving innovation, and developing new solutions to solve real-world problems. The conference also raised $150,000 for event charity partner Karrkas Kanjdji Trust. We were pleased to support this event, allowing us to further develop and grow our partnership with Aon as a key strategic partner for HDI Global. A successful end of year The year has flown by and while this issue focuses on our activity in Q3, now as we near the end of Q4, I am delighted to report that our HDI Global Australia team are on track to write over half a billion A$ in premium. Thank you to our team for their focus on technical excellence and bringing their passion and enthusiasm to the business. And of course, to you, our broker partners, for your continued support. We’ve had quite a few highlights in the past few months which I would like to share with you in this newsletter. HDInsight LIVE In our fifth HDInsight LIVE session for 2023, our resident Claims leader and expert David Lloyd shared his extensive knowledge. Reflecting on the evolution of claims management, you can read his key insights on page 7. Following this, in September liability took centre stage in our webinar education series. HDI Liability experts from the Asia pacific region shared their knowledge about trends and opportunities in the field and appetite for HDI. Some interesting discussion and insights to read about on page 11. Please register for our upcoming webinars in 2024: HDInsight LIVE: NatCat & ESG Risk Thursday 8 February 2024, 12.00pm - 1.00pm (AEST) HDInsight LIVE: Geopolitical Risk and Travel on Thursday, 7th March 2024, 12.00pm - 1.00pm (AEST) Stefan Feldmann, Head of HDI Global Asia-Pacific, Managing Director HDI Global SE, Australia Foreword
HDI Community During the month of September, we recognised RUOK? Day across our Australian offices. Led by our People & Culture team, we all took part in a variety of healthy and fun activities to encourage conversations among colleagues and looked after our physical and mental wellbeing. Our month of wellbeing included guest talks, yoga sessions, stress management workshops, a day of hiking, as we know it ‘Wandertag’ and much more. All small but important steps to take in keeping our bodies and minds in great shape. In this issue, our HDI Engineering team member Dean Eastick shares his insights into our growing mid-market insurance book on page 17. Plus, we also share an article from our head of HDI Risk Consulting in Australia Philipp Glanz who gives an insight into life as a risk engineer in Australia on page 21. Next year, HDI will participate in Tour de Cure to help raise funds for cancer research, prevention and support projects. I invite you in the season of giving to please support this great cause. You can DONATE here. I hope this newsletter issue will give you some new insights and inspiration. Please do reach out to myself and my colleagues with any questions or suggestions you might have. Wishing you a safe and festive season. Kind Regards, In Perth, our team were pleased to support the McLardy and McShane national conference, with our Melbourne HDI representatives also travelling in for the occasion. The event was well attended and abuzz with trading activity which our team were delighted to be a part of. In Q3 we were also pleased to support the annual NIBA lunch in QLD and WA. Our local Brisbane and Perth teams hosted two tables of broker guests and celebrated the achievements with peers at the award announcements. As we know, FIFA Women’s World Cup held the attention of the nation and the world in August. It was thrilling to be a part of and we were delighted to host some of our broker partners at the opening Germany vs. Ireland game, as well as the nail biting Australia Round of 16 match. So great to see everyone so engaged in the game and of course, ‘Go Matilda’s!’. In NSW, our now quarterly Happy Hour event was a great success with 80 brokers enjoying a ‘Winterfest‘ with our HDI team. Then, also in August, we were delighted to host a number of our broker partners on our HDI Winter Forum. The 2023 retreat was again a huge success, this time with banner weather for us to enjoy Thredbo both days. At HDI, we always strive to organise different and unique events and snow sports combined with blue skies was a great success with our guest brokers. The time spent together over the three days was a great opportunity to connect and build trust with broker partners, while practicing old and new skills in skiing and snowboarding. Meanwhile in Victoria our HDI Melbourne team supported the NIBA ‘Walk with me Luncheon’ hosted in the Marsh offices. A great cause and a wonderful event. In Brisbane, the Pacific Air Show wowed our brokers guests who enjoyed a (loud) and fun day. HDInsight Edition 10 - page 3 Stefan Feldmann Head of HDI Global Asia-Pacific Managing Director HDI Global SE, Australia Foreword HDI Insights edition 10 | page 4
Four business units, Marsh, Guy Carpenter, Mercer, and Oliver Wyman, shared their insights of current trends surrounding Mainland Chinese Opportunity, putting talent in focus, being the smart climate player, and getting ahead on investment. It was a great pleasure and honour for me to host HDI Global’s Asia Pacific Marine Underwriting Meeting in Hong Kong in September. Led by our global marine head, Mr. Kai Brueggemann, our colleagues from Australia, Belgium, Japan, Germany and Singapore made this event a great success. During this three-day intensive meeting, we discussed important topics such as Automotive, Commodities, NatCat, as well as the local and global challenges in the marine insurance industry. Huge challenges ahead, and so are our ambitions! We would like to express our gratitude to our broker partners from Hong Kong, China, and Taiwan for your continued support. We look forward to more opportunities to share our knowledge and experience with our colleagues into the new year and 2024. Kind Regards, HDInsight Edition 10 - page 3 Hello from Hong Kong Daniel Lau, Managing Director HDI Global SE, Hong Kong Hello from Hong Kong July in Hong Kong came with intense heat and higher than average recorded temperatures which brought typhoons and strong gusty winds. The team adapted and despite these challenges, were able to participate in the Data Analytic Leader Camp in Singapore. Our HDInsight LIVE webinar collaboration with Hong Kong Federation of Insurers market event “International Programmes in Hong Kong – What you need to know” on the 9th August was a great accomplishment. Over 100 international and local brokers, and important network partners participated in this 3-hour presentation, reinforcing our message to the market that HDI HK, as a member of the global family, can provide superb IP services to support our business’ partners global expansion. Thanks to our presenters including Rinnah Roque of IP operation, underwriting and reinsurance by Kenneth Law and Link Ip, and claims by David Ye. Having received very positive feedback, we believe we’ve taken the opportunity to instill in the market that HDI has an equipped, knowledgeable and capable team, able to tackle challenges intrinsic to IP. HDI Hong Kong recently also participated in the Marsh McLennan Insurance Executive Luncheon; the main theme was "Hong Kong is back on stage". Daniel Lau Managing Director HDI Global Hong Kong HDI Insights edition 10 | page 5 HDInsight Edit on 10 - page 5
HDInsight Edition 10 - page 3 Hello from Singapore Graham Silton, Managing Director HDI Global SE, Singapore Hello from Singapore The third and fourth quarters have been a busy time in the Singapore calendar. Our team have been very active with our clients, broker partner and insurance industry events. As a summary, we were delighted to sponsor the Marsh charity dinner supporting the Myanmar Jesuit Mission in July for which the team were honoured to receive a token of appreciation. Sunil Rodrigues spoke on a panel at the Aon Insights series in September with the conference's theme, 'Clarity and Confidence to Make Better Decisions,' and received tremendous feedback. Justin Lim of our Engineering team participated in a panel discussion on claims trends at the Commercial Risk, Construction Risk Management Asia 2023, this was the inaugural event and with over 250 attendees I am confident it will be the first of many. The conference provided helpful insights into risk management best practice and attempts to answer the question “is the insurance industry keeping pace with the demands of a transitioning construction industry in Asia?”. Please do not hesitate to get in contact with myself or any of the team. Kind Regards, HDI Insights edition 10 | page 6 HDInsight Edit on 10 - page 5 Graham Silton Managing Director HDI Global Singapore Mark Mackay was a panelist for the Asia Power Forum which was held on August 31st in Singapore and was followed by sharing his insights at the Malaysian Association of Risk and Insurance Management (MARIM) International Conference 2023, held in East Malaysia for the first time ever, in the state of Sarawak from 11th to 12th September with the Theme “Uncovering New Frontiers in Risk & Resilience”.
HDInsight LIVE: Claims trends Claims; it’s where the trust has to be “Trust is critical to the success of what we do as an insurer and what we do in the claims world,” says David Lloyd, Regional Claims Manager Asia Pacific at HDI Global. With over three decades of industry expertise building trust, Lloyd reflects on the past and present trends shaping claims in a recent HDInsight LIVE webinar. Graham Silton Managing Director HDI Global SE, Singapore Today the market and risk perceptions continue to evolve and adapt to new areas where insurers face a completely novel set of claims to deliver on. For Lloyd, he has seen the industry grow and change over time and shares what w s once c mmon practice is now no longer industry st dard. Ea ly in his career the levels of acceptable risk were quite different to how they are today. Past claims experience When I started my career, and I’m immediately giving away that I’m of a certain vintage, I was working for a commercial insurer in the UK and I remember the chief liability underwriter who was a very interesting character and the brokers loved him. A broker came in and asked him to take a line on the Channel Tunnel construction liability risk. In amongst the many questions the underwriter asked one stood out and obviously remains with me to this day – and this is looking at claims from the past – he asked the broker, “what’s the fatality tolerance?” From when the tunnelling beneath the English Channel commenced in 1988 until the tunnel began operating in 1994 between London and Paris, thousands of workers had been involved in the construction. At the peak of construction 15,000 people were employed. During the construction phase ten workers died, eight British and two French workers, an unacceptable number by today’s standards. “The broker said the lead underwriter’s fatality tolerance is 15 and if it hits or exceeds 15 you get the right to re-rate the program.” “Of course, nowadays we look at risks where our insureds are looking at zero long-term injury. When we talk to clients one of the things that is obviously the clear focal point is the extent of the risk management they have to prevent injury. When you look at that now compared to the story of the channel tunnel risk in itself, we have pleasingly come a very long way.” Sharing a photo of the project from the time, Lloyd points out the high risk of what was acceptable practice back then which is completely different now. Changing court procedures In addition to increased safety precautions, court procedures have changed over time also. “We had the case in the late 1990’s where a gentleman who had been hit by a falling power line and suffered injury to his neck and shoulder. The issue of liability was uncontested but we had severe reservations about the veracity of his claims in terms of the injury,” says Lloyd. “So we had him under surveillance and had footage of him reversing his car down the driveway in the oldfashioned way of putting your arm across the seat next to you and turning your neck and reversing.” There was also footage of him driving to the golf club and on the driving range. Consequently, the claim proceeded to court and was heard by a judge. Although the judge listened to the case, he did not actively watch the surveillance video. “When the tape finished the judge asked: ‘Has that finished now?’ And he looked up and said, ‘I didn't see anything that made me change my mind that Mr. Smith is injured as he has pleaded’. The judge selectively decided not to watch the video in order find for the plaintiff and subsequently he allowed for a reasonably generous award.” While the mentality to such cases has changed and the same would not happen today, the outcome of the claim has stayed with Lloyd; “There is always still a risk of running cases to court that can't be ignored.” Contemporary claims trends Today’s insurance market is a hotbed of evolution, especially in novel areas like energy storage and renewable energy projects. “As brokers and as industry colleagues, we want you to trust the company and the claims delivery promise.” David Lloyd Regional Claims Manager Asia Pacific HDI Insights edition 10 | page 7
HDInsight LIVE: Claims trends HDI Insights edition 10 | page 8 Motor Fleet claims Managing claims in an environment of rapidly evolving technology is about having the right expertise in the team, says Lloyd; “It’s something we just want to remind people that yes, we are a claims department, but we also recognise when we need to call upon those with more specific skills.” For HDI Global, motor claims are a new chapter in the company’s history and an area the company drew on specific external expertise. “From a claims perspective, to be able to support writing large fleets, commercial vehicles and sedan fleets we didn't have the claims capabilities within HDI but we did have people who have good experience in managing third party companies,” says Lloyd. Motor Fleet Insurance is a new product on offer for HDI Global across all vehicle classes including Heavy Motor, Mobile Construction Plant & Equipment (including Mining) led by Underwriting Manager Motor, Australasia, Khoder Chehade. After inhouse considerations HDI Global made the decision to engage a third-party claims handler partnering with Sedgwick, a global provider of a range of services to insurers, brokers, and corporates. “Sedgwick are onshore. It's not offshoring, it's outsourcing. We could have white labelled it and pretended it was HDI, however we wanted to be completely transparent and we're really pleased with the testimonials that we've got back from clients and brokers,” he said. “They've been really positive because we've got a dedicated team in the country managing our claims on our behalf. This has run eight to nine months now and it has been a really smooth process.” There have, however, been notable incidents including the explosion at a battery site of the Arizona Public Service (APS) in the US where the industry standard protocols failed to stop the fire. Then in 2019 a liquid coolant leak caused thermal runaway in battery cells which started a fire at the Victorian Big Battery plant in Australia. Both fires were extremely difficult to extinguish due to their ferocity. As the world grows its demand for lithium in preparing for the 2030 emissions reduction targets and beyond, there's clearly the need to have a better understanding of how lithium batteries need to be stored, says Lloyd. In the meantime, with Australia (next to Chile) being the largest lithium exporter in the world, local insurers are currently preparing for these new types of claims. In terms of managing renewable energy claims for solar as well as wind farms, reviews and advice from loss adjusters suggest that labour and skills shortages are creating complexity. “Poor maintenance and workmanship is causing a lot of the issues; design defects, mechanical defects. So our ability to make any recoveries against an OEM or anybody else is becoming more limited because of how these claims are arising. “For wind farms there is the additional complexity of the machinery itself. Once they're installed they're highly complex bits of machinery and when they fail [it’s] with catastrophic effects.” With the surge to put wind and solar farms in place there is also the challenge of maintaining existing assets. Getting equipment and parts of the highest quality for construction of new assets then also becomes an issue for replacing existing aging assets. Supply chain and inflation remain a factor due their impact on getting replacement parts. “W hen you look at the size that Australia is and where we are moving with our energy storage going forward it's a really interesting picture that it paints,” says Lloyd. “The battery energy storage systems are growing and that is part of the large increase that is predicted for its ability to draw down on stored forms of energy in periods of peak demand.”
HDInsight LIVE: Claims trends HDI Insights edition 10 | page 9 Class action There have been class actions in Australia since 1992 when legislation allowed for new litigations. In Australia to commence a class action seven or more people are necessary and the process works as an optin/out model. “It was simply done on the basis of how many people can you fit in a car? At the time it was six. So they said, ‘well, we'll make it seven’. Of course, you can get seven in certain cars now. What they wanted to do was avoid class actions arising from motor accidents or the like.” A class action has to be against the same personal entity or based on the same or similar facts. There also has to be a single common issue of law in order to be able to commence a class action. Since they commenced there’s been $8 billion in settlements, says Lloyd. “Forty of those class actions settled for $50 million or greater.” In 2021 it was approximately $1 billion, up 6% from 2021. Of those cases that make it to litigation, approximately 30% don’t make it to settlement. “They either get withdrawn or never proceed once they issue proceedings,” says Lloyd. “There are a certain amount of litigation funders that are more successful in running a case to a settlement.” As at June 2023, 28 class actions have been commenced with a projected 56 to be issued this year. The dynamic of class actions is evolving with more cases relating to cybersecurity now. “This isn't a surprise given the more recent cyber breaches,” he said. There is significant appetite to pursue class actions in Australia giving rise to the challenge of competing class actions which are difficult for insurers to manage. “Competing class actions are when the common issue might differ from person to person or the issue that created the failure or the loss,” says Lloyd. Due to delays on class closure the insurer can struggle to identify how many people are within the class and what the ultimate loss therefore could be leading to challenges in reserving for such eventualities. “Litigation funding most definitely increases the cost of defending class actions,” cautions Lloyd. Emerging class action trends While there has been a drop off in employee class actions, the team are closely monitoring silicosis cases. Silicosis is a disease marked by inflammation and scarring in the upper lungs caused by the inhalation of crystalline silica used in construction of materials such as bricks, tiles, concrete and artificial stone. It is seen as an issue for workers compensation but in Australia that risk is expected to also impact the host employer. The life cycle is shorter than other workrelated illnesses like asbestosis, where silicosis diagnosis is typically within five years and the incidents will also only affect limited workers. Settlements to date range from $450,000 to $750,000, but says Lloyd; “It's clear that there needs to be better regulation and monitoring required within Australia to understand and get better data so that insurers can really understand what the risks are.” Forever chemicals such as PFAS is another area where litigation is evolving at an accelerated pace. Used commercially since the 1940’s, PFAS chemicals can take decades to breakdown. While the issue has largely been concentrated in the US where there's been a number of high profile PFAS litigation cases including two recent major settlements worth $12 billion. There has also been a case settled in Australia. “People think this is a firefighter issue but it’s far greater than that such as an industrial plant that had been leaking water contaminating local drinking water leaching from the industrial side.” Sedgwick has a presence in 65 countries including Australia and, similarly to HDI, benefits from the breadth that the different international insights offer. The company has experience handling claims across A&H, travel, property, casualty, liability, and of course motor. In Australia, Sedgwick operates out of Brisbane and Sydney. The company has a 24/7 customer service team that's based in Wollongong who handle any out of hours inquiries. PFAS are widely used, long lasting chemicals, components of which break down very slowly over time. They are found in the blood of people and animals all over the world as they are present at low levels in a variety of food products and in the environment - in water, air, fish, and soil. Scientific studies have shown that exposure to some PFAS in the environment may be linked to harmful health effects in humans and animals.
HDInsight LIVE: Claims trends HDI Insights edition 10 | page 10 Contact - HDI The difficulty for a plaintiff in these cases is proving the loss as there 's no defined illness. It is difficult to establish a clear single point of exposure to PFAS chemicals to then link to a specific medical condition. “Unlike asbestosis the third party is downstream rather than the workers. It's not something you are working in or working with,” explains Lloyd. “That's where the clean-ups are required and the government direction and environmental harm. They're talking over a hundred billion dollars’ worth of potential litigation coming forward, going back decades.” Where to from here Looking to the future, Lloyd sees the industry continuing to evolve and leveraging AI and automation to accelerate claims assessment. “We're seeing that every insurer is trying to bring legacy systems forward and almost leapfrog into being far more modern. I think that there will come a time, and it may happen quite quickly, where everything just falls into place,” says Lloyd. “Because that is, at the end of the day, what, as a claims department, we're trying to do. Which takes me nicely onto the subject of trust. When you are talking to an insurer you are buying a product, you are buying the policy, you want to be able to trust that that policy gets responded to,” says Lloyd. The foundation of that promise continues to evolve, along with the types of claims and risk perception, mitigation measures and responses.Lloyd’s insights serve as a compass, navigating the tapestry of evolving risks, litigations, and market demands, ultimately steering HDI toward more resilient and agile claims management practices. Learn more about other litigation issues such as nuisance and the growth of nervous shock settlements and watch the full HDInsight LIVE: Claims Trends webinar here. Watch here: HDInsight LIVE: Claims Trends David Lloyd Regional ClaimsManager Asia Pacific P: +61 411 017 392 david.lloyd@hdi.global Please contact our HDI Team with questions “AI would help us with fraud detection as well,” says Lloyd. “Reducing any leakage and preventing any improper payouts. Making sure there's a level of fairness and customer satisfaction where we are being able to make those personalised settlements far quicker. The improved customer service, efficiency, accuracy, communication, and ultimately elevating the overall loyalty that we can get from a client.” Already the team are seeing the benefit of technology in supporting the claims process across all product lines. While the evolution of AI is still happening the demand is there and once some competitors start having success it will put pressure on the industry to increase uptake. “Faster processing is critical,” says Lloyd. “It's reducing processing time, it's ensuring quicker payouts to policy holders, accurate loss assessment images, descriptions to assess the loss with precision, minimising errors and disputes.
In the HDInsight LIVE sixth session for 2023 liability took centre stage. HDI Experts from the Asia Pacific region shared their knowledge about trends and opportunities in the field and appetite in the region. Business owners are exposed to a variety of liabilities, that can result in substantial claims. Liability insurance providing protection against such claims is in high demand. According to Allied Market Research the global liability insurance market was valued at more than US$25 billion in 2021, and is expected to reach $433 billion by 2031. In an HDInsight LIVE webinar HDI Global experts looked at trends and opportunities in this field from different country perspectives. Australia – Alex Tarantino, Regional Underwriting Manager Liability and Cyber, Australasia and APAC “In Australia we have seen a shift in Government investments from large heavy civil infrastructure projects towards the health and educational sectors particularly in Queensland. HDI is still focused on the construction business and continues to participate in large civil construction projects. Renewable energy is a hot topic for Australia and the whole Asia-Pacific region. Australia has a target of reducing emissions by 43% below 2005 levels by 2030. This means that we'll see a continued pipeline of opportunities for both underwriters and brokers. HDI very much wants to be part of this. We're seeing significant investment into renewable energy, and we're already seeing this flowing back to the insurance market. The other buzzword is embedded insurance which is a huge market for property and casualty. It's estimated to be worth $500 billion by 2030 and this will represent about 20% of the overall global market share. HDI will continue to look at opportunities in this area via our digital solutions team. We are also currently leading many of the mobility programs in Australia and with our specialisation in this area, we are looking for growth across the entire APAC region. HDI is seeing an increase in both Electric Vehicle (EV) and Autonomous Vehicle (AV) inquiries, particularly in Singapore and Australia. In the liability area, it's been a journey for the last four to five years to really establish HDI as a core insurer in the country. Today, HDI sits within the top three insurers in the large risk managed space and involved with many of the well-known ASX companies in Australia. This is bolstered by our international programme proposition, also our claims team and approach to managing claims. As our portfolio grows, our attentions start to focus more on what we call the middle market space or commercial middle market – companies with a turnover from between $20 million to $300 million (this is applicable for liability as well as all other lines of business in Australia). I would hope that over the next five years, HDI will move up the ranking tables and be in the top five insurers in this area as well. In Europe for example HDI is a leading insurer around pharmaceutical, agrochemical and chemicals business. And we also have an appetite for medical devices, life sciences and clinical trials. HDInsight LIVE: Trends and Opportunities HDI Insights edition 10 | page 11 Liability Asia Pacific
PFAS risks are now becoming more and more topical, particularly as reinsurers look to identify how insurers are preparing to manage these risks within their global portfolios. This is an area where brokers, particularly those involved in chemicals or agrichemicals, need to start managing information requirements around PFAS. The chemical compounds that are often found in plastics are getting into food supply chains and are being consumed by animals and humans. There's a concern around latent exposures as there is growing evidence that PFAS have existed in supply chains for a long time. Another focus area of HDI in Australia are International Programmes (IPs). We lead many of these in Australia, and we are looking to expand those capabilities across the Asia Pacific region. A special focus on Western Australia - Tami Sorensen, Liability Underwriting Manager “Western Australia (WA) is a strong economic centre underpinned by the resource industry. WA has always been a blue-collar state and that's been led by commodities and the resource sector. There's certainly an optimistic sentiment in our state economy at the moment. And whilst mining is at the forefront of exportable products for us, it really has a flow on effect to all services to mining. This involves equipment, catering, accommodation, etc and most certainly building and infrastructure. I'm also happy to report that the Covid hangover has lifted and we are seeing increased international trade and business expansion overseas. Canada certainly seems to be one of those hotspots currently. However, whilst economic sentiment is high, it further highlights the skills shortage in WA, along with the rest of Australia. With more contractors and labour hire personnel onsite to meet labour demands, this does increase our exposure to third party worker injuries. Whilst we are still fortunate in WA, as contractors can obtain principal extensions and waivers on their Workers Comp Policies, this doesn’t eliminate the risk for us. It certainly affords us protection against some of the aggressive workers' comp recovery claims we have seen on the East coast, however it still leaves us open to common law claims. These can be quite significant, particularly when you factor in mental anguish claims that come hand in hand with physical injury these days. It’s also not unusual to see an influx of Injury to Contractor claims when economic conditions are less favourable – which requires our consideration when underwriting.” Singapore – Sunil Rodrigues, Underwriting Manager, Casualty & Financial Lines “The Singapore office, which hosted the HDI team Liability Asia Pacific Conference in 2023, is ready to take a position as the go-to market for casualty in the Asia Pacific region. Currently there are plenty of opportunities in this region, however the market dynamics are also changing: Investors are demanding a strong commitment in underwriting discipline and profitability. And we are all aware of the shifting socioeconomic and geopolitical environment in our region. PFAS are widely used long lasting chemical components which break down very slowly over time. Scientific studies have shown that exposure to some PFAS in the environment may be linked to harmful health effects in humans and animals as they enter the food chain HDInsight Edition 10 - page 19 “I think the problem with the liability market is that it has suffered in the past around the inconsistency of premium pricing. I would always encourage and support the need for having a long-term relationship and having a premium consistency during that phase.” HDInsight LIVE: Liability trends and opportunities in the Asia Pacific HDI Insights edition 10 | page 12
HDInsight Edition 10 - page 21 Trends are urbanization combined with social mobility. The middle-income group is moving from the rural areas to the urban areas. With that, there is huge investment in infrastructure development like railways or airports, or different kinds of industry plants. Some of these projects are more than US$1 billion requiring large tower construction TPL and SPPI covers with long policy periods. Another trend is the “China-plus-one-strategy”. In this strategy companies are planning to invest in one or more additional countries outside China to de-risk and diversify their supply chains. Most of these multinational companies are trying to invest in an alternative country in Asia for manufacturing, mainly Thailand, India, Vietnam, and Indonesia. Now, with this, there are large capital expenditures, however when you create that ecosystem to provide inputs to these multinational companies, there is huge demand for global programs with large CGL limits. A third trend is the accelerated transformation into carbon free technologies like renewable energy, electrical vehicles, energy storage, carbon capture or new storage technologies. Every sector is now trying to decarbonize or reduce their carbon footprint and invest in such new technologies. The energy and power sector has taken a lead and transportation is following. For some cases, new risks are emerging, for example, thermal runaway in Lithium-Ion batteries. In the case of autonomous vehicles, the distinction between an automobile liability and product liability is getting blurred. In summary, however, there are plenty of opportunities in the region, and HDI is continuing to invest in new solutions.” What are current challenges for insurers? Inflation Claims cost and claims payment New and emerging risks such as PFAS and US exposures Weather-related events like bushfires and floods Sexual molestation covers and worker-toworker exposures Insurers are addressing these topics by the application of deductibles or by reducing capacity in certain fronts or by the application of endorsements and exclusions. Areas to take into consideration are risk selection, maintaining pricing adequacy and turnover increases. Hong Kong - Samson Lam, Liability Underwriting Manager “In August Shanghai officially established a reinsurance platform, which is a clear message for China to become a global reinsurance centre. China is the second largest insurance market worldwide: And although the growth of the general insurance industry has slowed from 5.7% in 2019 to an estimated 3.8% in 2023, the current growth is still significant. This growth is mainly enabled by the goal of China's 30-60 country strategy, which is related to decarbonization. China's carbon emissions should peak by 2030 and then start to decline. By 2060, carbon emissions should reach net zero. The country will need to mobilize all its resources to adjust the responsibilities that it faces as the world's largest carbon emitter, which offers us a great amount of ESG opportunities for the industry. As of 2021, China's renewable energy has achieved a market share of 50.9%, which already exceeded the fossil fuel capacity in the country. The northern region (north of the Yellow River) has already planned several renewable energy infrastructure projects. There are desert areas where solar panels have been installed and of course the world’s biggest dam project, the Three Gorges Dam. HDInsight LIVE: Liability trends and opportunities in the Asia Pacific What’s the current sentiment overall? “The hardening of the market that we saw in early 2019 is beginning to ease a little bit. This is mainly due to ambitious growth targets as well as due to additional capacity that has been deployed into the market.” Zubin Mathew Southern Region Senior Liability Underwriter HDI Insights edition 10 | page 13
HDInsight Edition 10 - page 21 Another hot topic for our industry is high-speed trains. China plans to connect every major and medium city with a high-speed train. To achieve this, the country needs to double the length of its existing 42,000kilometre network, plus the construction of bridges, tunnels, and stations. There are also multiple projects from the Bell and Road initiatives, an initiative where China invests in foreign infrastructure projects. Other interesting areas are the pharmaceutical and medical sectors where China as well as South Korea have shown the desire to explore new opportunities during the pandemic years. And finally, the technology boom which has hit these countries very fast.” Vikash Raman, Liability Claims Manager Trends in Damages The following examples stem from Australia but showcase trends globally. They relate to damages in the serious injury and industrial claims space and look at the types of judgments that are keeping claim costs up for insureds. CLAIM 1 The first claim has been dubbed the “million-dollar hot chip” claim. In this case the plaintiff experienced a tingling sensation after eating hot potato chips purchased from the defendant. Upon investigation, the food was found to be contaminated with caustic soda. The customer sustained some gastrointestinal damage and was later diagnosed with neuropathic pain disorder and post-traumatic stress disorder. The court accepted that the plaintiff's condition caused her to accept redundancy from her job. Her capacity for future earnings had been dismissed and that the plaintiff did not have to have children, but because of her working conditions later decided to do so. HDInsight LIVE: Liability trends and opportunities in the Asia Pacific The Shanghai Maglev can reach up to 460 kph and is the world’s fastest public train. It uses magnetic levitation rather than conventional steel wheels on steel rails. The train connects Shanghai’s Pudong airport with Longyang Road station in the city centre, completing the 30 kilometres journey in just seven and a half minutes. She was awarded more than $1.1 million in damages. CLAIM 2 The average mining wage in North Queensland is around $110,000 per annum. In the mining industry the involvement of the unions needs to be taken into consideration as well as that incidents can become very high-profile matters as accidents and fatalities draw a lot of media attention. The industrial manslaughter legislation in Queensland can complicate proceedings. One example is the case of a 32-year old’s minor laceration of his middle finger and a secondary psychiatric injury. There was medical evidence to show that the psychiatric injury had improved, but the judge said that the improvement had come through the plaintiff's sheer determination to improve his mental condition and he should not be penalized for that. Total damages were over $1 million. CLAIM 3 In another case in a different industry, a 51-year-old plaintiff complained of being overworked due to a performance improvement program. The plaintiff claimed to have suffered an adjustment disorder and depressed mood. The judge agreed that the performance program caused the psychiatric injury. There was a pre-existing depressive order, but the judge ruled that this only contributed partially. The plaintiff was awarded over $1.1 million. “Arguably with the two industrial cases, there's very little respite for defendants. While in one of the cases the claimant's condition had improved and while in the other, there was a prior history of psychiatric illness, the court made no allowance for these factors. So, our insureds, as defendants, are up against these kinds of cases when dealing with industrial injuries. Workplace injuries can also generate family and witness claims. Family claims, depending on the number of dependents, can be assessed upwards of $1 million. Witness claims concern serious psychiatric injuries and again we are assessing in excess of $1 million per witness claim. HDI Insights edition 10 | page 14
HDInsight Edition 10 - page 21 In addition, there are reputational issues for insureds as well and claims like these can have big implications for directors, including possible criminal sentencing. In Australia, all states in the Commonwealth now carry industrial manslaughter provisions in their legislation, except for New South Wales and Tasmania.” The Sharing Economy – Stephen Jones, Southern Region State Manager “Businesses had to pivot in a Covid and post-Covid environment with innovation becoming paramount. In some industries, whoever wasn’t quick enough innovating, ended up in insolvency. The winning businesses became incredibly savvy developing new tech and online capabilities. Most of these changed supply side logistics, creating alternate manufacturing hubs. This of course created significant issues with the supply of labour. Add the withdrawal of working visas, businesses struggled to build workforce and the only real progression in many industries was to embrace a contractor and even freelance contractor workforce in order to meet customer demands. This meant that many businesses needed to quickly change their HR contracts and risk management protocols with a focus of managing potential negligence around such critical elements as ‘Duty of Care’ for such contractors. In Australia there is currently pressure on governments to consider legislation that creates safety-nets for such workers. This allows us as an industry to work together to create many non-traditional solutions, and HDI takes pride in assisting in this space.” International Programmes (IPs) – Rinnah Roque, Service Delivery Manager for International Programmes producing office for Australia, Singapore and Hong Kong “International programmes (IP) cover property damage, liability, personal injury, product liability, clinical trials, and US motor claims. HDI has a lot of capability within the liability claims team to handle those claims where Australia is the producing office, even if a claim is being handled overseas, under the local overseas policy. We monitor the claim and remain on standby for any service or other inquiries, brokers may have. HDInsight LIVE: Liability trends and opportunities in the Asia Pacific Country of risk for liability is the coun try where the insured’s registered entity is domiciled. This means it might not be necessary to issue a local policy. In the case when employers are sending their employees overseas to perform work to fulfill a contract, this merely counts as a workaway activity. For example, if companies send employees to the US or Canada – both are not considered countries of risk and they don't have a registered entity – HDI does not need to worry about local policies because the policy from the host country (Australia, Singapore or Hong Kong) will cover the exposure. “It would be good if you can tell us ahead of time what your customers require locally so that we can prepare for it. It's important for everyone to consider the wording that will be used locally. HDI uses an agreed local standard wording. This is a base wording which eliminates the going back and forth and makes it possible to expedite the process and issue the policies within 30 days.” Rinnah Roque, Service Delivery Manager for International Programmes producing office for Australia, Singapore and Hong Kong. HDI Global issues policies in over 150 countries around the world together with partners. HDI has been in this line of business for more than 60 years and works with 3000 IP specialists who can service clients’ needs around the world. Altogether HDI has led 5,000 programs already and has issued over 25,000 local policies. Learn more from our Liability experts HDI Insights edition 10 | page 15 Watch here: HDInsight LIVE: Liability APAC trends
HDInsight Edition 10 - page 21 HDInsight LIVE: Liability trends and opportunities in the Asia Pacific Contact - HDI Alex Tarantino Regional Underwriting Manager Liability and Cyber, Australasia and APAC P: +61 406 173 524 Alex.Tarantino@hdi.global Stephen Jones State Manager Southern Region P: +61 410 314 550 Stephen.Jones@hdi.global Tami Sorensen Liability Underwriting Manager, Western Region P: +61 411 011 622 Tami.Sorensen@hdi.global Sunil Rodrigues Underwriting Manager, Liability/ Financial Lines P: +65 8380 3887 Sunil.Rodrigues@hdi.global Samson Lam Underwriting Manager, Liability/ Financial Lines P: +852 2588 8530 Samson.Lam@hdi.global Zubin Mathew Senior Underwriter Liability P: +61 411 010 548 Zubin.Mathew@hdi.global Vikash Raman Liability Claims Manager P: +61 410 717 516 Vikash.Raman@hdi.global Rinnah Roque Service Delivery Manager Producing Office IP P: +61 433 476 522 Rinnah.Roque@hdi.global Youwill learn: Hear fromour HDI expert team: Jane Ravi Underwriting Manager Power and Energy Australasia HDI Global SE, Australia Wiebke Cundill Senior Risk Engineer Natural Hazards HDI Global SE, Germany Haris Michaels Underwriting Manager, Engineering Australasia HDI Global SE, Australia Philipp Glanz Risk Engineering Manager Australasia HDI Global SE, Australia NatCat and Physical Climate Risk Assessment webinar RSVPNOW Thursday 8 February 2024 12.00PM - 1.00PM (AEST) What’snewandwhat youneedtoknow. JoinusandlearnfromourglobalHDINatCatexpertandlocal teamonevolvingphysical climateriskassessment improving resilience, recoveryandscenarioplanning. Learnkeyquestions andconsiderations forESGreportingandthechangingregulatory requirements. Evolving predictive models quantifying physical climate risk exposure Significant global and supply chain environmental hazards Improving loss mitigation resilience, recovery, and contingent business interruption Transition planning, scenario analysis and evolving ESG reporting requirements for physical assets Natalie Storer Claims Manager Property & Operations HDI Global SE, Australia Learn more with HDInsight LIVE in 2024 HDI Insights edition 10 | page 16
There are more than 50,000 mid-market companies in Australia. These growing businesses are dynamic, tech-savvy, and innovative, creating new business opportunities and exploring new regions and markets. For HDI Global the mid-market space is an increasing focus and portfolios have seen significant growth over the past 10 years. The mid-market is a bit of a mystery. It is much less defined than the small or large businesses, but one “secret” is out in the open now according to Australian research company McCrindle which is: “This is where the action is.” According to the Australian Bureau of Statistics (ABS), which defines medium-sized businesses as those who employ between 20 and 200 employees, there are more than 50,000 medium-sized businesses in Australia. The Australian Taxation Office (ATO) defines mid-market businesses as companies with an annual turnover between $10 million and $250 million. HDI Global, which is now involved with many of the well-known ASX companies in Australia, has shifted its attention to focus more on the middle market space or commercial middle market. The aim is for HDI to be in the top five insurers in the mid-market in the near future. The mid-market space within HDI Global’s engineering line of business is therefore increasing focus, and the portfolio has seen significant growth over the past 10 years according to Dean Eastick, Senior Engineering Underwriter. “In the early days, the predominant growth was within the corporate space,” Mr Eastick said. “However, this coincided with an abundance of capacity combined with the soft market leading to many insurers not making money and some even leaving the space entirely.” Fortunately, HDI Global was able to remain in the business due to a diverse portfolio of both contract works and industrial special risks. However, the need arose to further diversify portfolios with the solution being the mid-market space. Since then, the midmarket book of engineering business has contributed significantly to the growth and profitability of HDI Global and Mr Eastick hopes that this will remain for the years to come. HDI Global Engineering & Construction HDI Insights edition 10 | page 17 Mid-market, the engine room of the economy “HDI Global’s mid-market engineering team have come a long way since the formation of HDI Global within Australia. They have a growing team with an eagerness to develop the book further into a market-leading portfolio.” Dean Eastick Senior Engineering Underwriter
Contact - HDI HDI Global’s mid-market engineering team, while still relatively new, is growing to become one of the main markets for risks within this space, he said. While HDI still participate in corporate risk, with this development they are also bringing focus and their technical expertise to mid-market risks which they define as risks from $10 million to $300 million. The team has the capability of writing almost any type of contract work risk for both corporate and mid-market clients. New Team Members The team has added two dedicated construction risk engineers to further assist HDI Global’s mid-market engineering team: These are Dean Pola and Ben Mollee, both highly skilled risk engineers with a long history within the industry. Dean Pola has had a successful career with major insurance companies in Australia and the Middle East. Ben Mollee has over 15 years’ experience in the construction sector, having worked on projects across Asia, Australia and the Middle East. HDInsight Edition 10 - page 21 Mid-market, the engine room of the economy HDI Insights edition 10 | page 18 Dean Eastick Senior Engineering Underwriter P: 61 (0)415 335 617 Dean.Eastick@hdi.global New Cooperation Another area in which the HDI Global engineering team saw a way to expand was by partnering up with Epsilon Insurance by providing capacity for their contract workbook. With specialties in the small to medium-sized civil engineering as well as mechanical and electrical engineering space, Epsilon covers an area that has generally been seen as difficult to obtain insurance in. The team is extremely knowledgeable and experienced, making for a perfect partnership between HDI Global and Epsilon Insurance. Please contact our HDI Team with questions Preferable risks include: Vertical construction such as residential and commercial buildings Industrial buildings Fit out-contractors Electrical and mechanical contractors While the appetite in these sectors is broad, there are some areas in which appetite is limited. These are: Heavy civil risks such as roadworks, pipelines, wet risks, tailings dams, etc. Additionally, they can provide insurance solutions to risks within the Pacific Islands, however, this is on a case-bycase basis and certain areas are outside of appetite such as Fiji and Vanuatu Jonathon Willoughby Senior Engineering Underwriter M: +61 (0)414 448 485 Jonathon.Willoughby@hdi.global
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