If you are over 30, you almost certainly remember where you were; what you saw; and how you felt on the New York morning of September 11th, 2001. “9/11” is now a term that needs no preface or explanation to be understood in terms of what it alludes to.
The consequences of that day still haunt and affect our world. We should never forget their origin; nor the tragic loss of life , or the trauma of those who responded, or who survived.
A generation has since grown up which has no knowledge of a time when air travel did not mean dealing with the indignities and arbitrariness of “airport screening” and the institutionalized suspicion of customs and immigration officers, let alone the risks of being “profiled”; while the “surveillance state” in its modern guise traces its origins back to that day.
And now, in the midst of a continuing pandemic, one begins to wonder whether a new generation will grow up which is accustomed to wearing a face-mask in certain circumstances; to dealing with the often absurdly complex and inconsistent rules supposedly designed to minimize further transmission of the virus; and which will see enforced “social-distancing” as normal, rather than bizarre.
None of the above means that we believe that the changes and consequences seen are somehow all unwarranted; nor are we trying to equate one event with the other. Rather, the point is that we should never assume that what is currently accepted as “normal” is unchanging. The inefficiencies and changed behaviours that result from such events have consequences, often negative, yet human beings adapt, as they always have.
So far as the (re)insurance industry is concerned, each event has been a seminal one, leading to significant shifts in risk appetite and modelling. In the case of 9/11, the industry realized that the scale of potential acts of terrorism (and just their economic costs) had undergone a step-change such that only the state could backstop such risks; while, with the pandemic, the industry had to deal not only with the economic costs, but also with the reputational consequences of ill-drafted wordings, as well as the need to “go remote” almost overnight.
To their credit, (re)insurers have proven to be as resilient as they are supposed to be, with no material failures seen. So, the core principle of always being there to pay valid claims in full still stands- something which may have been overlooked amidst all the “sturm und drang” over whether or not a particular cover was intended to respond to “Event X”.
That does not mean that it is appropriate to be complacent and to assume that the industry can now continue “as before”. Anyone who believes that is remarkably naïve. One risk is that (as is endemic amongst most militaries given to fighting the last war) the nature of the event will be added to the “risk catalogue” as a discrete risk, and incorporated into revised PML models without understanding and accepting the reality that neither 9/11 nor the pandemic was unique as a risk, even if the impact was on a greater scale- and yet everyone was “surprised”.
In our opinion, the lessons should be not only to review and revise assumptions, probabilities and correlations constantly, as well as to look for signs of emergent properties within the world that presage extreme events, but also to understand that, sometimes, the best way to avoid a particular type of risk as a (re)insurer is simply not to write it, because there is no acceptable or bounded price for it. We suspect that the latter issue, in particular, will become ever more pertinent.
The Awbury Team