Monday 08 July 2024 - Company news

The 2010s (Part I) The road to recovery

Still reeling from the effects of the financial crisis, the world kicked off the new decade with some major celebrations. The first World Cup on the African continent was held in South Africa, closely followed by the Winter Olympics in a significantly colder Vancouver, Canada. Meanwhile, in the UK, the royal wedding of Prince William and Princess Katherine hit our screens in 2011, and just a year later, the UK and Commonwealth celebrated Queen Elizabeth II’s Diamond Jubilee. In the summer of 2012, US Olympic swimmer Michael Phelps made history by winning his 18th and 19th gold medals at the 30th Olympiad held in London, UK.

 At HCC, we had reasons to celebrate as well. We entered the new decade with a fresh rebrand, and stronger financials than ever before.

We delivered impressive growth, breaking through the $3 billion barrier in gross written premiums by the midpoint of the decade. Building on our impressive momentum so far, the years ahead were set to be amongst our most important.

Meanwhile, in the background, the world economy was rebuilding after the 2008 financial crisis, and governments were reviewing and implementing new regulations to prevent another financial disaster.

The Japanese Tōhoku earthquake shakes the world

Whilst the world rebuilt after a financial crisis, the Japanese Tōhoku earthquake and subsequent tsunami that rocked Japan in 2011 was a harrowing reminder of the devastation that extreme natural catastrophes can cause. As the most powerful earthquake ever recorded in Japan, and the fourth most powerful since modern seismography, its impact was felt far beyond its epicentre.

It led to the tragic deaths of around 20,000 people, and as of last year, the total reinsurance claims paid out amount to around 1.29 trillion yen ($8.8 billion). The impact on the insurance industry was significant, leading insurers to reassess risk models to properly assess and mitigate natural catastrophe risk.

The earthquake also caused the Fukushima nuclear disaster. Insurance companies had historically remained very cautious when it came to insuring nuclear plants, and this subsequent nuclear disaster reinforced the negative perceptions around insuring these types of assets.

Regulation makes its mark

The post-financial crisis era was filled with important regulatory developments, the most impactful of which was Solvency II, which has tremendous implications for the insurance industry. 

Developed throughout the start of the 2010s and finally enforced in 2016, this landmark piece of legislation demanded more stringent measures around capital reserves and risk appetite, impacting insurance and reinsurance companies in the EU. Solvency Capital Requirements meant that insurers had to hold enough to ensure they could survive financial shocks, and minimum capital requirements were introduced which enabled regulatory agencies to step in if capital fell below a certain threshold.  

Following a surge of different regulations across Europe, this single piece of legislation harmonised rules across the trade bloc, laying the foundations on which insurance businesses could rebuild after the financial crisis. 

Meanwhile, in the US the Dodd-Frank Act was passed in 2010, paving the way for reform of the derivative market. The Act was introduced to reduce systemic risk, increase transparency and bring greater coherence to existing regulations while also promoting market integrity within the sector. Dodd-Frank aimed to reduce the excessive risk-taking that led to the 2008 Financial Crisis and bring in greater consumer protection, including the creation of a new consumer watchdog to protect families and individuals from exploitation by mortgage companies and pay-day lenders.

New milestones

By the middle of the decade, we had founded three new divisions, introducing new products and lines that included Property Treaty, European Transactional Risk Insurance, Artisan Contractors Liability and Engineering Reinsurance. Alongside this, we also bought Brooklyn Ventures – the last acquisition we would make before joining the Tokio Marine family.

You’ll have to wait for the next blog to hear about that. In the meantime, you can read about our history in our previous blog posts here.