NEWS

The Baden-Baden briefing

Many companies use the timing of the Baden-Baden Reinsurance Meeting to launch new products, reports and make other important announcements. Here is a quick overview of the latest such updates.



Climate campaigners stage another protest

“The protesters argue that treaty reinsurance remains a major loophole in reinsurers’ exit from coal.”

The Baden-Baden Reinsurance Meeting was targeted by climate campaigners again this year, who staged a protest calling on the companies attending to rule out coal from all reinsurance, including treaty reinsurance.

Campaigners from groups including Insure Our Future, Parents for Future, and Fridays for Future welcomed conference attendees with banners, flyers, speeches and street painting with the message: “Insure Our Future, Not Fossil Fuels”.

The protest has become a regular event in Baden-Baden but the presence of protesters will have a different resonance this year—in a period when climate change has moved right up the agenda of reinsurers.

Most reinsurers have now made significant commitments to embracing decarbonisation strategies but the protesters argue that treaty reinsurance remains a major loophole in reinsurers’ exit from coal.

It also comes amid deeper changes in the industry. Several commentators speaking to Baden-Baden Today this week have stressed that environmental, social and corporate governance factors will play a more prominent role in negotiations with detail and documentation increasing being requested. Climate change and coal represent just one part of a more fundamental issue the industry is addressing.

“We want to be the central partner for comprehensive risk management.”
Doris Höpke, Munich Re

Reinsurance can transcend risk transfer: Munich Re

Munich Re has said it expects to see continued market hardening in the January renewals as major losses and inflation drive more pricing discipline. It also stated that, as risks evolve and become more complex (eg, COVID-19 and cyber) the role of reinsurance is increasingly transcending mere risk transfer.

It said the most serious losses in Europe this year were in connection with the floods that struck Central Europe in mid-July. Overall losses amounted to an estimated €46 billion ($53 billion), of which more than €9 billion were insured. In Germany, the flooding—which produced overall losses of around €33 billion and insured losses of at least €7 billion—was the most expensive natural catastrophe in its history.

At the same time, the eurozone has seen a recent spike in inflation—well above 3 percent in September, and climbing to over 4 percent in Germany, Munich Re noted. Higher inflation also leads to higher claims costs. In the long term, the inflation rates will likely normalise again, but remain above the pre-COVID level. In contrast, interest rate levels have remained virtually unchanged. Taken together, these two factors are producing an upward pressure when it comes to insurance prices.

Speaking in Baden-Baden, Doris Höpke, member of the board of management at Munich Re, stated: “Rising prices for various assets and the latest major losses make considerably higher reinsurance rates in Europe likely. The major losses produced by extreme flooding in Central Europe and the rise in weather events like droughts and wildfires affect regions that, in some cases, are not characterised by risk-adequate prices and conditions.

“In addition, the higher inflation is accompanied by continuing low interest rates for investments. Accordingly, I see a number of indicators for prolonged market hardening when the renewals come.”

She added: “We want to be the central partner for comprehensive risk management, to be a resilience provider, if you will. The basis for insurance, and for risk management of any type, is to monitor and understand risks, and to subsequently develop forward-thinking solutions that can strengthen society in the long term.”

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“We are aware of our responsibility and will play our part in overcoming the damage.”
Michael Pickel, E+S Rück

Flood losses will prompt price rises: Hannover Re’s E+S Rück

E+S Rückversicherung, the Hannover Re subsidiary responsible for the group’s German business, expects higher prices—in some areas markedly so—and improved conditions in property and casualty reinsurance on the German market following the devastating flood damage in the summer.

It noted that the severe flooding caused by the low-pressure system Storm Bernd led to insured market losses in Germany alone well in excess of €8 billion ($9 billion). Added to this were further hail and heavy rainfall events, as a consequence of which 2021 will likely be the year with the largest ever burden of insured losses from natural catastrophes in Germany.

Against the backdrop of the heavy loss expenditures, E+S Rück anticipates appreciable adjustments to prices and conditions in the property line in Germany, especially for catastrophe covers. Demand for high-quality reinsurance protection continues to grow.

It said that natural catastrophe covers in Germany will see appreciable price increases in the aftermath of the summer’s historic flood damage. After years with comparatively low claims burdens from natural hazards, the year 2021 was one of the most damaging ever.

In addition, losses and potential losses for programmes connected with COVID-19 could often be priced only minimally into the previous renewals because it was not yet possible to definitively resolve the scale of pandemic losses and the question of coverage under the reinsurance treaties.

The pandemic-related strains for some customer relationships have increased further, which means that in these cases additional adjustments will be needed for the reinsurance treaties in the 2022 renewals.

“After the terrible severe weather events of June and July, 2021 will go down as one of the costliest years ever for the German market,” said Michael Pickel, chief executive officer of E+S Rück.

“We extend our sympathies to everyone who has been and continues to be impacted by the disastrous flooding. As a reinsurer, we are aware of our responsibility and will play our part in overcoming the damage.

“It is our expectation that many insurers will further expand their reinsurance protection in the wake of these latest losses. Following on from the considerable strains incurred last year from the COVID-19 pandemic, the recent bad weather losses, low interest rates and price rises in the construction industry will lead to an appreciable increase in reinsurance prices,” he said.

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SCOR backs Willis climate initiative

“Companies achieving accreditation will have the opportunity to access insurance capacity and capital to support their orderly transition.”

More insurers have signed up to support the energy transition and the Climate Transition Pathways (CTP) accreditation framework developed by Willis Towers Watson, an initiative designed to help businesses transition to a low-carbon economy in return for continued access to insurance capacity and capital.

SCOR has signed up to align capacity to support the CTP solution, an accreditation framework that provides insurance companies and financial institutions with a consistent approach to identifying businesses with robust low carbon transition plans aligned to the Paris Agreement.

This follows the announcement that Liberty Specialty Markets had become the first insurer to support the CTP. Companies achieving accreditation will have the opportunity to access insurance capacity and capital to support their orderly transition and help them meet their low carbon commitments.

Graham Knight, global head of natural resources, said: “At Willis Towers Watson we are committed to helping our clients in a sustainable way. CTP was designed to help those organisations wishing to transition to a low carbon economy and we are absolutely delighted to see more insurers supporting the framework.

“Today’s announcement is another step towards ensuring we can provide continued access to insurance for companies committed to transition as well as a greater level of certainty around the future availability of risk capacity. By helping our clients in this way, we are helping to provide a sustainable future.”

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Image courtesy of shutterstock.com / Halfpoint


Lead image courtesy of shutterstock.com / Stockbym