Jess Brown: Yes, it certainly has. The last two years have shown just how wrong we can be in terms of our scenario analysis.
We tend to look at past historical events to look into the future, which doesn’t seem overly sensible if you look back at it now.
When we look at Spanish Flu, it does seem similar to Covid, but what we didn’t expect this time was the extent of government intervention, which has a massive impact not only on the economy but also on the pandemic itself.
“The last two years have shown just how wrong we can be in
terms of our scenario analysis.”
It turned it from being a life event, loss of life similar to the Spanish Flu, to a non-life event, where we had lots of business interruption claims, event cancellation claims, which would never have happened without government intervention.
One additional aspect that we also wouldn’t have got from looking into the past is the speed with which it spread across the world, which is something we hadn’t seen before.
People were spreading it all over the world, sometimes without any symptoms, and in previous pandemics they couldn’t hop on a plane and travel around, and they were too ill to travel at all.
Hasan Ahmed: We all had an expectation that had been influenced by the global financial crisis, which itself was new territory in terms of government intervention and Quantitative Easing but I was very surprised by the level of government intervention here.
When you look back at previous pandemics, each one has its own intricacies and with this one it was the government intervention.
“The dislocation between public markets and economic performance
was another eye opener.”
Also, the dislocation between public markets and economic performance was another eye opener. This has happened in the past and will certainly happen again.
But the degree to which we saw public markets really diverge from what we were seeing on a day-to-day basis, and what we were seeing in our homes and on the streets is one big lesson.
Hasan: This was a good example where we didn’t necessarily see a change in approach, as much as an increase in intensity and the frequency of the sorts of activities that we were performing.
“I saw a shift to being asked for daily numbers.”
Everyone has their own monthly and quarterly type reporting processes. I saw a shift to being asked for daily numbers and what was going on, how the portfolios were looking, and what we needed to be looking at with much more intensity, as well as what we learnt along the way and the shift in our day-to-day focus.
There wasn’t much of a change in the tools that were in place and the methodologies that we used, but certainly a greater intensity.
Jess: Yes, I completely agree. We still do the same exact risk monitoring processes, but we did it a lot more and even from an internal perspective, you want to make sure that the senior management stays very well informed, so that they can make quick decisions easily.
“At a macro level, our management wanted to make sure that the
market is still solvent."
Also from the regulatory standpoint, they wanted much more regular risk reporting, so that they could look at the market in this whole new world to them.
At a macro level, our management wanted to make sure that the market is still solvent, that we are going to survive, and it is not a massive problem for our industry.
