Business
Flexibility Is Key for Insurers Managing Inflationary Challenges
Inflation likely won’t subside anytime soon, and insurers will need to be proactive and flexible if they want to stay on top of the challenges, said Keith Buckley, managing director of Fitch Ratings’ global insurance rating group. He was speaking on the most recent episode of Carrier Management’s Strategy Sessions webinar series.
“I think the biggest thing is companies just need to be very proactive in thinking about it and making sure that they’re thinking about it from all angles and all the different levers they can pull, so if their vision isn’t able to be executed as they’re hoping, they can maybe change course and find another way that can narrow that gap between inflation and pricing,” he said.
Buckley said part of the challenge is that inflationary pressure is coming at a time when the economy is already challenged due to the ongoing COVID-19 pandemic, supply chain shortages and even the war in Ukraine.
“We haven’t seen this type of inflation in many years in the U.S., so it’s going to take some time to manifest,” he said. “We’re in a very unique economic situation coming out of a pandemic lockdown and the recovery from that, which created some additional challenges and problems.”
With this in mind, insurers need to prepare for inflation to endure for a number of years at even higher rates than are currently being seen, he added.
“Being ready is a very important part of a good strategy,” he said.
Pulling Different Levers
In terms of pulling various levers in their playbooks, Buckley said one of the biggest levers insurers can pull is pricing.
“The challenge insurers always face, and this is just part of their core business model, is that it’s an industry where you don’t know your cost of goods sold at the time the product is sold, and that’s why you employ a bunch of actuaries who can do their predictive work and try to figure out what those cost of goods might be so that they can price the product accordingly,” he said.
One difficulty, however, is that not all lines of insurance can raise their prices, as regulatory pressures could limit some consumer-oriented lines of business.
“Regulators in various states are very interested in why you need to raise these lines and if you can demonstrate that to them and can get the rate approved,” he said.
In addition, companies that are more pessimistic about inflation and overshoot their competitors risk losing market share if their pricing is higher than others, he said. On the other hand, companies that underprice against inflation could lag the competition, widening their gap between inflation and pricing.
Fitch Ratings: Keith Buckley. Photo by Andrew Collings.
“There are a number of external pressures, there are challenges in predicting what assumptions you want to use, and there are just going to be differences in execution across companies,” Buckley said. “Managing all of those elements well is going to lead to not all companies performing the same way in dealing with this issue.”
That said, Buckley said that overall, he is seeing more insurers being proactive when thinking about current inflation.
“I would say insurers are definitely thinking about this issue,” he said. “It’s probably one for us, as credit analysts, where we get more questions on this topic than almost any when talking to investors. I think for insurance companies too as we talk to them, it’s a big part of the strategy discussion.”
He said this is something Fitch is taking into consideration in its ratings analysis.
“What are they doing in some of the key lines of business that are being affected? Are they recognizing or are they putting in new rate increases? Are they able to get those through regulators?” he said. “So a big part of our analysis now is just trying to understand strategically what are companies doing and trying to get a sense of how well they might be executing. It’s still somewhat early days in certain lines and for certain companies, but that’s sort of the angle we’re taking. We recognize it’s a risk a lot of companies haven’t really faced before, at least in the lifetimes of the employees that work there.”
Indeed, Buckley said one of the big challenges with the current inflationary environment is that data and history exists from previous inflationary periods, but there are few who lived through it, especially those in a decision-making situation.
“I think that’s a real challenge, because it means that people are learning it for the first time,” he said.
A Unique Environment
That said, what’s unique about this current inflationary period is that there are many other factors putting pressure on the economy as well, Buckley said. In additional to the pandemic and subsequent supply chain challenges, changing weather patterns are further complicating things.
“I think the one challenge with climate change is that it is sort of a long, slow phenomenon, so insurers tend not to think about or price out to 30 years from now; they think over the life of policy, a lot of which are much shorter,” he said.
With this in mind, insurers will need to consider what strategies can be adopted now to make sure they’re prepared as the climate situation evolves, Buckley said, while remaining flexible to changes in weather patterns.
“When I think of climate change relative to the general inflationary pressures we’ve been talking about, I would say if I think over the next three to five years … probably the general inflationary pressures are going to be most pronounced and the one companies are focusing on the hardest,” Buckley said. “But certainly the climate change issues and how those evolve … that’s going to be a further complication [insurers] have to deal with and further factor in as they try to deal with this one very challenging issue.”
He said this all means a lot of uncertainty exists right now.
“There’s still a lot of uncertainty as to how will this play out in people’s crystal balls, because there are so many moving parts,” he said. “So I think that’s one of the most unique challenges we’re facing now is just trying to come up with what is your assumption for inflation, how many years will it last, how will it play out, what type of stress situations do you see and how much do you factor them into pricing and things like that. I think that’s definitely a unique challenge companies are facing today because of the other things that are happening that are either driving or ancillary to inflation.”
As he looks into his own crystal ball, Buckley said he sees inflation likely creeping into most lines of business.
“Right now, companies are dealing with inflation hitting into things like auto and property lines where inflation very much affects a product whose costs will drive up claim costs,” he said. “General inflation, if it endures for a number of years, will start creeping into all products … So, this will ultimately creep into every line of business, but it’s going to come at different stages and different paces and that’s going to be an additional challenge for actuaries if they get to that situation and trying to figure out how do I price it now.”
Beyond thinking about pricing as well as remaining proactive and flexible for what’s ahead, Buckley said the biggest thing companies need to be doing is simply recognizing that inflation is a real risk that is not going away anytime soon.
“If you think back about six, seven, eight months ago, there was definitely a school of economists who thought inflation would be transitory and go away and not something to worry about as much,” he said. “I think very few are in that camp now, but given that it was not that long ago that there was a large school thinking that, that does create a challenge and make us think about execution. The first step in execution in this type of environment is saying, ‘Okay, we’re going to buckle down, assume it’s happening, have some assumptions that make sense, and have contingency plans in place as we think about repricing.’”
Unarguably one of the most exceptionally unique amazons ever produced by the African continent, the story of Ibukunoluwa Abiodun Awosika is intriguing in many ways. Despite being raised in a male-dominated society, she shines as a star, defying all barriers to become a global force in banking, entrepreneurship, and mentorship.
The Founder of The Chair Centre Group, former Chairperson of First Bank of Nigeria, co-founder and past chairperson of Women in Management, Business and Public Service (WIMBIZ), Awosika, is a trailblazer and an outstanding motivation to the African girl child that no barrier exists where there is a will. With a net worth of over $18.6 million, according to estimates from Forbes Africa as of 2012, the 61-year-old is worth more than her monetary value, especially when measured by the impact she’s made as an author and motivational speaker.
Awosika, a recipient of many awards from reputable global brands, was a guest on Channels Television’s Amazing Africans programme, during which she shared her journey from ordinary to extraordinary.
Enjoy some excerpts from this interesting interview!
In The Beginning…
I’m very proud of my entire experience at Methodist Girls High School. First, it was a school that had a lot of culture and a lot of values and sought in many ways to influence our minds in an all-round way. I was very active in sports. I was in the school’s relay team from my second year in school. I was pretty fast, as my friends used to call me ‘The Rabbit’. I was very involved in school plays and I used to debate to represent my school in debates and all of that. So, you had a full life; all the other things to do were fun and we were mixed backgrounds so it wasn’t just an elitist school. It was girls from every kind of home but we all got into the class because we were smart and so you learned from each other so it was a good community.
I have a quote here: ‘Seeing my drive as a young entrepreneur, my father used to say I have given birth to this one and if anything happened, he was always present to assist me even if it meant selling his house to pay up any debts’. He never discouraged you and I’m sure that had a great influence on what you felt you were capable of doing when you don’t have to go against your parents you have their full support.
I am a daddy’s girl, no doubts and no apologies. In many ways I think I had a special relationship with my dad, my siblings always say that he was a hardworking man, he believed in the value of working hard but he was also a very simple man in many ways. My father was in many ways the epitome of contentment. A man who worked hard, and pursued his goals but was happy with his estate in life and was comfortable sitting with the President and can sit the next day with the mechanic and have a gist and talk about it.
When we were young if my father’s driver was driving us to school or somewhere, you didn’t have the right to say, ‘My driver’, because you would get told: ‘You don’t have a driver. My driver doesn’t belong to you’. My dad will tell you: ‘He is my driver and you just have the privilege of being driven’.
I didn’t understand when people asked me later in my 20s: ‘Oh you did something, weren’t you afraid it wasn’t a thing that a girl could do? I didn’t understand it because I grew up in a home where we were mainly girls. My dad had mainly girls. Well, they had three boys in their lifetime and one passed and so I have two brothers and there were five girls. So, we were mainly girls and my dad never told us there was something we couldn’t do. Rather, it was about that we could do anything we wanted to do and we got all the support and encouragement to do that.
My mother was the same in many ways. She had left her Cameroonian home at a very young age, she was about 18 when she left to marry the guy she had met. I think my dad had gone on some Man O’ War thing to Cameroon and they met. She had been betrothed to another king or something; her father was the king of their community. She came to Nigeria and they got married. My dad went to England to further his education and my mom was pregnant with me. She had my brother, she was pregnant with me and was waiting to have me when my dad left for school in England and so she waited, had me, and after I think barely a year, she left my brother and myself with my grandmother and she went to join her husband in England.
You’ve described your father as ‘non-traditional’ in more ways than one. He’s also non-traditional when it comes to maybe even viewing women would you say?
In many ways. I had the liberty of expression, that’s the word I would use and I think that went for myself and all my siblings. My dad was strict in terms of values. He was strict especially because we were mainly girls but as he was strict in terms of making sure he kept us on the straight and narrow path, he was a very supportive, liberated parent in terms of expressing ourselves.
It’s not only your parents who passed on some important life lessons, your grandmother also has played a significant role in your life. Could you let us know how she also lent herself to your trajectory and success?
Well, I think my grandmother had the most influence in nurturing my early years because my grandmother was responsible for me until my parents came back from England by the end of ‘68, early ’69, when I was about 6 or 7 years old or thereabouts. So, the early years of my life were my grandmother’s to nurture. They used to call her by my name ‘cos she had only boys and I was the girl she raised. She had a little shop in our family compound area in Ibadan. My family is from the capital of Oyo State in Ibadan and my grandmother used to sell salt. She had this little shop where she used to sell salt and little things. I think maybe my first exposure to business was sitting in my grandmother’s little store and joyfully handing over products to customers.
I had things figured out so when you follow the trail, you will see just how much the hand of God played in my life you know. When I was in secondary school, I thought I wanted to become a doctor and then I found out that Medical School involved working with real dead bodies and I quickly changed my mind. It was that simple for me, I couldn’t imagine myself playing around with dead bodies so I gave up on being a doctor. Then I thought I wanted to be an architect. Anyway, I ended up in the university to study Chemistry but by the end of my first year in Chemistry, I realised I didn’t love it. I could pass Sciences but it wasn’t a love for me and I wasn’t enjoying it. So, I then thought okay I’d like to be a lawyer because everybody thought I’d make a great lawyer. After all, I used to debate so well and I thought they might just be right. I remember going to sit outside the office of the Dean of Law every day for many days until his secretary said to the man: ‘Look you have seen this young lady, she’s been coming here every day’. And then, this elderly professor, he is dead now. He asked me to come in and asked me: ‘What can I do for you young lady?’ And I said: ‘Sir, I’d like to transfer to law next session.’ The man looked at me and had a good laugh and thought: ‘I like your guts. You know if I only take one person next session it will be you but you must pass very well’. I said, ‘Yes sir’. However, that would be my problem because once you pass very well my department will never release me to him and if I didn’t pass well enough, he wouldn’t take me. I had a Catch 99 Situation. Anyway, I resolved the situation myself because by the end of the session, I changed my mind about wanting to be a lawyer. I now decided I would like to be a Chartered Accountant so I could go and work in a bank.
During my youth service, I was a very rich corper because I was very busy; I was presenting a programme on CTV in Kano. They had some commercial programmes that I used to present. I was doing voiceover and commercials. I was running aerobics classes for private clients because I was an athlete even up to my university level. So I was doing everything to open up myself and I was making money doing that.
From Auditing To Furniture-Making
When I decided I didn’t want to do the audit anymore, I came back home and when I came back I didn’t want to sit down. I had been making my own money and now I didn’t want to go back to my parents to start asking for allowances or anything so I wanted any job I could find first. So, the first job I could get was in a Furniture Company, one week after I came back from Youth Service. Now, I just wanted something to kill time I still had my eyes on going to work in the bank and I only lasted three and a half months in that company. First, I realised whilst there why I had thought about studying Architecture ‘cos all the creative part of me came alive and I realized I was in my element in terms of what I was doing there but I didn’t like the value system of the company and the way they did their business.
I realised working there that when they hired the carpenters, they came with their tools, and that the expensive machinery, there were smaller versions of them, and you could rent the use of those machines without even buying them and there are places where you go and do pay-as-you-go for them to process things for you. There were different factors of production available in this space and all I had to do was think of how to bring them together with three carpenters, two sprayers and two upholsters that was the team.
Building A Transgenerational Business
When I was 31 years old and going on 32, I had my second child. I decided then that I would like to build the business to the highest possible level but I wanted to have a life and in wanting to have a life, I made up my mind that the business must be able to survive without me and I wanted to do it in my lifetime and not when I’m dead so I decided that by 50 I was going to be out of running my business every day. By 48, I had a firm come in and consolidate all my businesses as they were into the Group and then picked people to manage the business in different levels. I have the title of CEO (but) right now I just tell them to refer to me as the founder because I don’t run the business. I have a COO who has the CEO responsibilities, running the entire business and she’ll get his title soon enough. For the past so many years now, I have kept my eye on the business. I’m responsible, I’m focused on helping them in terms of trying to identify the right strategy and if we want to get into new businesses but I’ve allowed the Group to try and find its way without me and I’ve always shunned any temptation to go back.
Why?
Because if you really want a business to outlive you it has to be able to live without you.
Bitcoin surpassed the $50,000 mark on Tuesday, marking its highest value in over two years.
Investor optimism surged as anticipation grew regarding broader trading approval in the US, with hopes riding high on potential green lights for cryptocurrency exchange-traded funds (ETFs).
Despite an initial dip following Washington’s approval signal last month, Bitcoin has rebounded impressively, boasting a 25 percent rally since January 22.
As of the latest data from Bloomberg, the cryptocurrency peaked at $50,328, underscoring the resilience and upward momentum in the crypto market, leaving observers optimistic about its future trajectory.
“Enthusiast buyers bring in more enthusiast buyers pushing prices further up,” Fadi Aboualfa, of Copper Technologies, said.
“The cryptocurrency has momentum on the back of several green weeks and has a large chance of going up further when markets see weekly movements upwards of 10 percent (as we saw last week).”
By 0330 GMT Tuesday, bitcoin had dropped slightly, to $49,950.
While Bitcoin has made an impressive recovery, currently standing above $50,000, it still lags significantly behind its peak value of nearly $69,000 in 2020. This rally signals a bounce-back for the cryptocurrency, which faced turbulent times marked by high-profile scandals and collapses within the crypto industry.
Last year, FTX, the world’s second-largest crypto exchange, suffered a dramatic downfall, with its CEO, Sam Bankman-Fried, now confronting potential consequences. Prosecutors have characterised the situation as “one of the biggest financial frauds in American history,” and Bankman-Fried faces the looming threat of up to 110 years in prison.
In November, Changpeng “CZ” Zhao resigned as CEO of Binance, the world’s largest crypto exchange, following both his and the company’s admission of guilt in extensive money laundering violations.
Bitcoin’s upward trajectory is further fueled by optimism surrounding potential interest rate cuts by the US Federal Reserve this year, as inflation appears to be easing. The cryptocurrency’s value is also influenced by an anticipated supply crunch next year, attributed to the recurring event known as “halving.”
Bitcoin, earned through intricate problem-solving by powerful computers in a process called “mining,” experiences a reduction in reward every four years. With the next “halving” scheduled for April, the limited supply dynamic continues to be a driving force behind Bitcoin’s value surge.
Microsoft joined Apple on Wednesday as a three trillion dollar company, as its big bet on artificial intelligence continued to impress Wall Street.
Now second to Apple as the world’s biggest company by market capitalization, Microsoft’s shares were up 1.31 percent at $404.
Apple remains narrowly in first place at $3.02 trillion after reaching the $3 trillion market capitalization mark for the first time in January 2022.
But it has fallen below the milestone, even briefly losing the pole position as biggest company on the markets when Microsoft briefly overtook the iPhone maker earlier this month.
Microsoft more than any other tech giant is riding the wave of excitement over AI.
The Redmond, Washington-based group has a major partnership with OpenAI, creator of ChatGPT, that is reportedly worth $13 billion.
Since the arrival of ChatGPT, Microsoft has launched several products enabling companies and individuals to use the capabilities of generative AI, notably via its Bing search engine and Copilot virtual assistant.
Since the launch of ChatGPT in early November 2022, Microsoft shares have gained some 67 percent, with Apple’s up by about 40 percent.
Microsoft publishes its results on January 30.
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