The rise of artificial intelligence brings the prospect of huge productivity gains for the insurance industry, as well as multiple emerging risks to cover, the Bermuda Risk Summit heard.

Panellists in a discussion on complex risks and specialty insurance markets described how they used AI and what kind of coverages the broadening use of the technology could necessitate.

Peter Horrobin, cofounder and co-CEO of Banyan Risk, said an engineer at his firm had built a new business intake form, using AI.

“In six hours, he did what six months ago would have taken him three weeks,” Mr Horrobin said.

“And when I look at the ability to utilise AI tools, it isn’t about laying people off. It's getting rid of all of the mundane tasks that are no longer needed.

“In our last six months, it's absolutely staggering some of the examples that we're seeing out there. The opportunity for people to get out of the horrific paper-driven cutting and pasting is truly exceptional.

“And I would certainly hope that everybody utilises these tools. It will be a huge opportunity for our industry and amazing for Bermuda.”

George Alayon, deputy director, supervision (fintech), at the Bermuda Monetary Authority, suggested that AI was no longer optional.

“I think AI is going to be a necessity for the sector, and not a luxury any more,” Mr Alayon said. “If people are not using AI these days, then you are so, so far behind.

“It should be part of everyone's toolkit, whether professionally or personally. And at the BMA, we invest a lot in AI. We now have a separate data science and AI team, and they have grown over the last seven years. And we are also investing to upskill our supervisory teams.”

Devin Page, head of specialty insurance, at Ascot Bermuda, saw burgeoning risks ahead that the insurance industry would need to adapt to.

“Just think about the host of the risks that AI actually produces,” Mr Page said. “What is the knock-on effect of having $10 billion to $40 billion data centres popping up everywhere at the fastest pace that they can get built? Probably some risk there.

“And what is the risk of entry-level individuals coming into our industry and not learning those kind of really mundane but hard, basic foundational skills, now that it can be offloaded to AI? Maybe some risk there.”

How future products were designed to cover these risks — either as stand-alone or bolt-on coverages — remained to be seen, he added.

“I imagine that the amount of premium going to tech/cyber will continue to increase exponentially,” Mr Page said.

Mr Horrobin, who cofounded Banyan in Bermuda as a managing general agent underwriting complex risks, made the case that MGAs would be on the front line of creating solutions to emerging risks.

MGAs are intermediaries that act with delegated authority from insurance companies to underwrite and issue policies. Mr Horrobin said partnering with an MGA gave insurers greater flexibility to innovate and allowed emerging risks to be quickly underwritten.

One advantage for MGAs was that specialists like engineers or digital-assets experts would be more likely to want to join an MGA than a traditional insurer, he added.

“I think the potential for more MGA growth is enormous, but we're also going to see more of the emerging risks move to MGAs,” Mr Horrobin added.

“There’s no question that MGAs are here to stay. You’re just going to see more and more start-ups. It’s true that if you come to an MGA, you’re taking substantially more risk than if you're sitting at a Fortune 500 insurance company.

“But I just think we're going to continue to see more insurers and reinsurers providing backing to MGAs.”

While conceding that the insurance industry was frequently criticised for failing to innovate, Mr Horrobin said he had seen remarkable strides forward in Bermuda.

“I think this is our finest hour,” Mr Horrobin said. “In my 15 years here, I’ve seen how the island’s transformed and embraced new products helped by a supportive regulator, and I think it's only the beginning.”

Mr Page said the nature of insurance meant innovation was inherently riskier than it was for many other sectors.

“When we’re accused of not moving fast enough, I like to remind folks that in insurance, we have a fixed upside, and our downside is always larger than our upside,” Mr Page said.

“A VC [venture capital] fund or a private-equity investment bank can put $100 at risk because their upside could be 10,000 times that. When we put $100 at risk, we know the return will be less than $100.

“Given that construct and the constraint we’re within, I think it’s really impressive how fast we can innovate.”