John R. Dacey (pictured), former group chief financial officer at Swiss Re, says insurers should focus less on headline noise and more on four structural forces he believes will drive industry performance in the coming years: artificial intelligence, energy, macroeconomic conditions and private credit.
Speaking at Swiss Re’s 40th Outlook Breakfast in Toronto, Dacey said each of these areas is already influencing underwriting, claims and investment outcomes, and each carries material downside risk if misread.
Dacey’s first message was that insurers that are not already deep into AI need to get moving.
“All of you have CEOs and chief technology officers… speaking about your commitment to AI,” he told the room. “What everyone is doing is getting after the low‑hanging fruit of how you make yourself more efficient… by utilizing AI.”
He sees that efficiency work as table stakes. The real differentiation, he argues, will come from embedding AI along the value chain.
On the life and health side, he pointed to carriers that are already using AI to refine distribution and product targeting – something the industry has talked about for years but is now becoming real. AI is helping them identify who genuinely needs which product, manage lapses more intelligently and sharpen retention where it really matters.
Dacey pointed to three areas where he expects AI to change P&C underwriting. First is underwriting quality – using models to remove some of the human bias from underwriting decisions and to ensure that the most recent data flows not just into risk models but into live pricing. Second is the use of new data sources, bringing in information that has “never been utilized for underwriting” before, particularly in commercial lines and, increasingly, in personal lines as well. Third is portfolio shape: using these tools to quietly avoid more of the worst risks while selectively attracting better ones, gradually tilting the book in a more profitable direction.
“The companies that are actually getting this right are going to start to see two things happen,” he said. “They will avoid some of the worst risk… and they can also figure out a way to shape prices enough to get some of the best risks your competitors have into your portfolio.”
On the margin, improving a combined ratio by even one or two points over time is “worth a lot of money – you know that better than I do,” he added.
He sees similar potential in claims efficiency and fraud detection. But he also underlined the flip side: escalating cyber and technology risk.
“The risks around technology and cyber crime are increasing in not incremental steps, but huge steps,” he warned. “If you write covers for cyber risks, you should be scared. And if you don’t, but have any responsibilities on the operational side of your own organization and client data, you should be scared – and you should be doing something about it.”
Dacey’s second theme – energy – would have been on his list “regardless of February 28,” he said, but recent events in the Middle East, and disruptions in the Strait of Hormuz, have changed the tone.
You feel it less in North America, and less in Europe than in Asia, but in countries like the Philippines, Vietnam and Thailand “day‑to‑day activities are being constrained dramatically by the absence of natural gas and, to a lesser degree, oil,” he said.
Even if the Strait reopened tomorrow, “this is going to be longer‑lasting.” Those same economies are becoming more important in global supply chains, amplifying the knock‑on effects.
For insurers, the immediate concern is familiar: another inflation spike that pushes up replacement costs faster than premium income can catch up.
“If you have to worry about paying claims and replacement values, you need to start thinking yesterday about whether we're going to have a similar situation to 2022 where the cost is going to outstrip any premiums that we’re able to get on board?” he said.
He urged risk managers to think through “worst‑case scenarios” rather than just their base case. If the Strait of Hormuz remains disrupted and infrastructure in the Gulf suffers more serious damage, he warned, the resulting spikes in oil and gas prices could be “far in excess” of what we’ve seen so far – with a non‑trivial chance of triggering a global recession.
“That’s not my prediction,” he stressed. “But you can’t ignore the possibility that this could spiral badly… you’d be doing a disservice to your own companies.”
The third force on Dacey’s list is macroeconomics – specifically, interest rates and inflation.
His base case is that rates will remain higher, for longer, than the market hoped at the start of the year.
“The easing of the US Federal Reserve is unlikely to happen,” he said, adding that it is “tough… to imagine” any material drop in Canadian rates while inflation is still present, especially with fresh energy‑driven price pressure in Europe.
For insurers, though, that’s not all bad news.
“Your fixed income portfolios should be just fine,” he said. “You’ll continue to invest at adequate rates, and you don’t have to go chase rates by more risky assets.”
That last line set up his final – and, in tone, most cautionary – theme.
Dacey’s fourth concern is the rapid growth of private credit and private loans since the 2008 financial crisis – much of it outside the banking system and, critically, outside the reach of bank regulators.
Over the past decade, he noted, four big firms – Carlyle, Apollo, KKR and Blackstone – have grown their private credit exposure from around US$800 billion to US$3.5 trillion.
“Three and a half trillion dollars,” he repeated. “About a third of this is related to technology, which is crazy. Most of it’s related to private equity investments, which themselves are leveraged, which is crazy.”
In parallel, there is roughly US$1.5 trillion of private loans outstanding, a market that expanded as banks stepped back post‑2008 and non‑bank lenders stepped in. Many of those deals were structured by people with bank backgrounds, but “without the regulators behind them and without the infrastructure of the banks behind them.”
Roughly a third of those private loans, he added, are now held by individual investors – many of whom are discovering, uncomfortably, that these are not liquid savings products. They can typically withdraw 5% a quarter, “maybe 10,” but not all at once.
Headlines have already focused on investors asking for their money back. On its own, Dacey doesn’t see that as system‑threatening. His base case is that there will be losses and “some companies which are more exposed that have done some stupid lending” – but that “smart people” will find ways to recycle capital and take their hits over time.
The risk, in his view, lies in contagion if something else goes wrong.
“If there is some unforeseeable event that pushes us over the cliff, there’s a long way to fall for the industry, a long way to fall for the economy,” he said. In that scenario, a scramble for liquidity – especially among investors who have themselves borrowed to fund these private assets – could amplify stress in ways we haven’t yet seen.
Again, he wasn’t predicting catastrophe. But his message to an insurance audience built on thinking about low‑probability, high‑impact events was simple: ignore these downside scenarios at your peril.
“If you’re not thinking about the possibility of these downsides,” he said, “you’re doing a disservice to your own companies.”
