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Geopolitical, cyber-related risks on the rise, says JLT Specialty USA CEO

? Specialty insurance brokers must increasingly take a global approach to consulting as companies' risk complexities grow

? Insurance underwriters and brokers are more frequently turning to insurtech services to supplement their clients' or customers' risk management

The demand for different types of specialized business insurance risk tends to ebb and flow with the economic cycle. As new risks emerge, others fade, but they may just become dormant until macroeconomic or regulatory conditions change.

Patrick Donnelly, President and CEO of JLT Specialty USA, recently spoke with S&P Global Market Intelligence about trends in risk management and the growing role of insurtech in managing risk. Some responses have been edited for length or clarity.

S&P Global Market Intelligence: Where is demand emerging in risk management?

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Patrick Donnelly, JLT Specialty USA president and CEO

Source: JLT Specialty USA

Patrick Donnelly: If you looked over the last five or 10 years, the order of some risks may have changed, but when we talk to clients, we talk about risks in the aggregate rising, and we talk to them about the velocity of risk increasing. For us, that means risks accelerating or increasing, and risks that are increasingly interdependent or cross classes that might require different approaches or different techniques for a company to make the best decisions about how to manage those risks.

We see what other people are seeing: risk associated with the geopolitical environment, weather-related or environmental risks, cyber or data privacy risks and risk associated with emerging technologies, like the internet of things or wearables.

Are there any areas were risks are fading or not as significant as they once were?

In some cases, it's the sensitivities around risks, or other things have come to the fore. It doesn't mean those risks have lessened, it just means they may not be the priority for risk managers. Some of them are cyclical.

If you take the 10-year time horizon, back in the 2008-2009 time frame, all of the discussions about key risks from a global impact or likelihood perspective were about asset price collapse and systemic financial risks. If you looked at the more recent 7-year time horizon, some of the risks being identified were concerns around oil and gas price spikes. If you look in the nearer term, the 2015-2017 range, it's the opposite end of that spectrum.

Some of those risks today are less potent because they're more cyclical in nature. For others, however, I think it would be wrong for someone to look at them and someone to say those risks are decreasing. I just think they're not the highest priority among emerging risks today.

How has the market for insurance services changed in recent years?

The increasing convergence of intermediaries, brokers, capital providers — whether that be traditional underwriters or alternative capital ­­— increasingly look at that risk equation and look at ways to add differentiated value. In a lot of cases that might mean things like insurtech, whether that be third parties coming into the space or traditional players making investments.

In that increasing risk velocity environment that I described, clients are looking for differentiated insights to support improved risk awareness, to improve decision making. Everyone is rushing into that space to try to help add value through helping with that risk awareness and decision making. The key for anyone coming into the space is: How do you make decisions that are accessible, that are easily understood, and that are relatable, and that are actionable, available to clients in real time? A lot of players in the insurtech space are coming into the market trying to address that client need.

Another example is the growth in the [excess and surplus] market, a market that is devoted to trying to address areas of real risk complexity. And innovation, from a product and solution perspective, continues to grow.

Where does insurtech come into play in your services?

We have to have a model in which, when we're working with an insured or client, where we're bringing solutions to them. Sometimes, there are things that we've developed that are a JLT solution. In other cases, in that continuum of serving the client, we've got to be able to recognize where there's a third party that's made an investment that can be a part of the process and that would add tremendous value to a client.

We have partnerships in the insurtech space that we work with and through to make sure we're bringing the full spectrum of a solution to a client.