ESG & Cyber: all the talk – Lucy Clarke, President of Marsh Specialty & Global Placement

This week´s guest on The Voice of Insurance podcast is Lucy Clarke, President of Marsh Specialty and Global Placement, Marsh, who covers a diverse range of subjects, making for a compelling and engaging episode.

From algorithmic underwriting to pricing, the London Market and cyber, Mark Geoghegan and Lucy cover a lot in just 30 minutes. Kicking off the interview, Lucy discusses her views on the 1.1 renewals and commenting on growth, Lucy mentions that the business has seen growth in almost every line of business and region, but especially in cyber, construction, and renewable energy.

Speaking about the areas that are generating increased focus in the market and will continue to do so in 2022, Lucy singles out ESG, as it continues to be an interesting if somewhat baffling area for people, and cyber, “I would say that the things we are talking about the most are ESG and cyber.” Lucy discusses how Marsh is taking ESG seriously and has recently hired key management in the ESG area, “We´re trying to develop actual meaningful products that help our clients.” Lucy speaks about a free-to-use ESG tool Marsh developed that helps clients assess their own risk at a more granular level than the score they may get from a rating agency.

Mark asks for Lucy´s views on the current pricing environment, with Lucy commenting, “Our perspective on these price increases for our clients, in probably one of the most stressful environments that they have ever been in: enough is enough, and so we are pushing back really hard…” Talking further on pricing, Lucy says, “In terms of challenges in the market, I guess I always call out pricing; first, that is a real challenge for our clients.”

The cyber challenge

In an industry report released in Nov 2021, risk decision-makers voted cyber-attacks as the number one concern. Speaking of challenges in the market, Lucy discusses how cyber is a critical area for clients and Marsh, “I think the last 24 months it´s really a combination of real dramatic price increases, coverage restrictions, severe capacity pull back, and you know for our clients that´s really an untenable combination, and so if we were to continue on that same path, the market will have a credibility issue with that cyber product. It´s a critical line of coverage for our clients to buy, they want to buy it, but if we´re on this path, self-insurance will have to be an option.”

However, Lucy is confident about stability coming to the cyber market, “I think we feel pretty optimistic that the markets are looking for a way through and that there are certain markets looking for exposure to cyber that perhaps haven´t written it in the past, so really creating that capacity in a meaningful product, I do think there is reason to be optimistic.”

As for other hot spots in the industry apart from cyber, Lucy discusses her concerns on differentiated underwriting focus, “Getting that differentiated underwriting focus is really important, so I don´t think we´ve got enough of that. We´re trying to do as much as we can in terms of data and information to support Underwriters making those kind of decisions, so that´s a real frustration, that differentiated underwriting piece.” Lucy mentions other pain points include broad exclusionary language, silent cyber, communicable disease, and climate change exclusion. Lucy discusses how imposing this kind of exclusionary language has the potential to cut out big swathes of coverage unintentionally, and with millions of clauses, it places clients in an impossible position to navigate. As for whether these pain points could create a new market and potentially new classes, Lucy stresses that her focus is to be clear with customers on their coverage, so they aren´t paying twice.

What about the London market, asks Mark, Lucy observes, “London is super relevant and important and kind of the centre, but I think the things that are really cool about London and important for London to remember and maintain are that kind of London responsiveness, London product innovation, flexibility and that tendency to sort of respect the intent, there´s a real sort of history of that here, and I think that maintaining those things is really important.”

As the conversation turns to technology, Mark asks Lucy for her opinion on whether algorithmic underwriting will make an impact; Lucy remarks, “That kind of single source of algorithmic underwriting means that we can submit something very easily maybe go do some other broking things and come back and have competing quotes and so something like that it makes our job easier and so there is a little piece of algorithmic broking I guess in there.”

Enjoy the podcast.