Underwriting Emerging Risks within the Sharing Economy

As the COVID-19 pandemic underscores the importance of digital connectivity in all our lives the sharing economy continues to grow at a blistering pace.

Lloyd’s participants gathered during the latest “Tuesdays with Lloyd's - Virtual Roadshow” to discuss ways to help organisations manage the risks associated with these new business models and new ways of life.

Chris Moore, Head of ibott and Deputy Head of Casualty at Apollo Syndicate 1969, provided an insight into insurance solutions for the sharing economy, speaking alongside Lloyd’s Chairman Bruce Carnegie-Brown in a roundtable moderated by Ted Pike, Casualty Broker at Besso.

The sharing economy has changed hugely over the past decade, diversifying into several different sectors within a short period of time. This has challenged the insurance industry to keep up with the growing business models.

“The sharing economy is absolutely an area of emerging risks, and emerging risks do not come without challenges,” Moore said.

The biggest challenge he said is to determine what exactly needs to be insured and to create new solutions for risks that traditional insurance products are unlikely to cover.

It is not uncommon for sharing economy platforms to double, triple or even quadruple in size from one year to the next, which puts a great amount of pressure on the insurance product to be flexible with its offerings and coverage. But with challenge, comes opportunity, explained Moore.

Utilising big data is crucial in creating new solutions. “When I started out in the industry, it was challenging to fill in the gaps between the data, but today, it’s almost the other way around where there’s an excess of data to go through,” Carnegie-Brown said.

“It takes willingness from participants to take on new risks in order to obtain a data exchange and begin to build out models to get an actuarial perspective,” he added.

“One of the benefits of Lloyd’s is there’s a multitude of diversity in terms of appetite in the market,” Moore said. The ability to share risk amongst the marketplace allows access to more capital through syndicates supporting those growing risks together.

“It’s no question the risks our customers are facing are changing dramatically and it’s up to Lloyd’s to make the market as efficient as possible,” explained Carnegie-Brown. BluePrint Two is focused on delivering significant operational efficiencies, making it simpler and more efficient for market participants to trade, noted the Lloyd’s Chairman.

An Oliver Wyman analysis shows the sharing economy is set to increase by over 1,150% from 2015-2025. “Within the Apollo team alone, we see 10-20 submissions a week for sharing economy companies,” Moore said.

Although COVID-19 has had an impact on ridesharing and home stays as people stay home and limit travel, some sectors of the sharing economy have seen huge growth, such as delivery apps for groceries and, most recently, people offering their motorhomes for rent.

“Trust is considered the currency of the sharing economy as people offer their prized possessions or services with a community they don’t know.” Insurance plays a big part in building the trust to help enable growth for a platform, explained Moore.

“There’s an open-door policy at Lloyd’s that allows customers to come in if they’re not getting something from the insurance industry and to collaborate and create a new solution,” he said.

All of the sessions, as part of Tuesdays with Lloyd's - Virtual Roadshow, are designed to provide you with an update on Lloyd’s priorities, an overview of new risk transfer solutions, and fresh perspectives on multiple classes of businesses written at Lloyd’s in the US - our largest market. A list of the dates and topics for the upcoming sessions is available here.