So, what did we see; and what should we have learned?
First, if you think you have seen everything, you haven’t! No rational CEO or CFO would have expected to be confronted by the risk of their company’s revenues going to zero (or as good as) because of government diktat, and have no recourse to change the outcome. The risk was foreseeable in the sense of possible, yet unlikely to have been in any CRO’s collection of “emerging” risks. He or she would probably have been laughed at in any strategic planning meeting held during 2019 for suggesting such an eventuality as posing a potentially existential risk.
Second, the speed of decline and the reversal of market prices across most asset classes were also unprecedented. No previous “crash” or “recovery” saw such a violent “V” shape.
Third, governments in many cases almost “threw” money at their economies to stave off a meltdown and depression, and in ways and quantities that were simply breath-taking. There was little debate, because the problem was seen as so grave and unbounded.
Fourth, hope is a powerful force. Stock markets are quite clearly functioning based upon the swift delivery and successful administration of effective vaccines. That is a reasonable prediction, but still merely a probability, not yet a certainty.
Fifth, “normal” became a nuanced label. Hitherto, while people may have accepted and understood that economies and behaviours are far from static, most (even the self-described “disruptors”) would have expected a gradual evolution. Instead, in many areas, we “fast-forwarded” to the future, as the time-scale for change in areas such as the adoption of remote-working, or tele-medicine truncated significantly.
Sixth, just when you think a particular scenario and outcome has now assumed a reasonably certain shape, it changes yet again- witness the sudden impact of the B 1.1.7 COVID SARS variant upon expectations for vaccine effectiveness, speed of transmission, and case management, with all the knock-on effects that may have in health and economic terms.
Seventh, as we wrote recently, experience in the credit markets in terms of defaults and bankruptcies has been distinctly odd, with their level generally declining significantly year-on-year in many jurisdictions.
Eighth, human beings are both remarkably resilient, and yet vulnerable. Most societies have continued to function effectively in the face of lockdowns and sometimes arbitrary governmental actions. However, the true cost, for example, in terms of mental health or educational attainment is yet to be tallied.
Ninth, much of the (re)insurance industry has had a year it would rather forget, as the combination of the pandemic, greater frequency and scale of “ordinary” NatCats, low investment returns and asset price volatility continues to weigh on results and underwriting performance, even in the face of a hardening market across many product lines.
Tenth, competence, and the constant application of proven techniques, coupled with iterative adaptation, make the difference between success and failure, whether in controlling pandemics or in building franchises.
At Awbury, our business model and franchise have proved resilient, which has enabled us to manage the impact of the pandemic, seize new opportunities and plan for further expansion.
In closing, may we take this opportunity, Dear Reader, to wish you a healthy and prosperous 2021!
The Awbury Team