MARKO JAZBEC, SAVA RE
The need to fill cat capacity
One of Sava Re’s main strategic goals is to achieve proper geographical diversification of its international portfolio.
Could you give us a sense of what the floods that hit your home country of Slovenia in August meant for you?
From the perspective of the Sava Insurance Group, the August floods, following extreme rainfall, were an unprecedented nat cat event. The floods caused significant damage predominantly in the household segment, which included damage to buildings and contents of individuals.
The extent of the overall loss to our portfolio was initially difficult to assess, as the existing 500-year flood maps did not cover all affected areas. Several areas were cut off, and claims reporting was noticeably slower than for other nat cat events, as people had primarily to secure their safety and belongings, thus making their homes livable.
Now, more than 10 weeks later, the picture is becoming clearer and our initial ground-up loss estimate of €90 million ($95 million) has been revised to €63.6 million. It will continue to be revised as claims develop.
Will these losses prompt changes to rates and terms and conditions?
Yes. A reassessment of the risk, especially after new circumstances with respect to the flooding severity, is a must, not only for our company but for the wider Slovenian insurance market. The exercise is in progress, focusing not only on possible changes to applicable rates and flood cover terms and conditions, but also on the existing flood maps, which consider the one-in-500-year event.
The recent floods show that the maps need to be refined and expanded to reflect developments in the potential severity and extent of such events.
This event was clearly a strong wake-up call for the un- and underinsured. But there will always be homeowners and perhaps tenants of rented property who do not take insurance. Similar to other noticeable nat cat events in the past, there is an increased demand regarding the expected flood covers from the household and business segments. The latter seemed to have optimised their flood coverage and premium costs.
“The recent floods show that the maps need to be refined and expanded.”
Marko Jazbec, Sava Re
What is your message to your clients as a reinsurer and your partners in the retro space?
Reinsurance has always been a long-term business, which essentially incorporates the fact that, over an extended period, we will see years with better and sometimes worse loss results. As a global reinsurer, we and other markets have witnessed and participated in events that have had a much stronger impact than this year’s Slovenian flooding.
Understanding this, we naturally expect similar developments, including some reinsurance premium development, as our reinsurer partners, after offering us support, are in payback.
Would you advocate any form of industry pool to manage flood risk?
The debate on how to approach flood risk and, more broadly, a bundle of nat cat risks in the future is ongoing. There have been several different solutions worldwide, but they are all essentially country- and geography-specific. The first question would be whether the need for a solution stems from a lack of demand in terms of insurance penetration or a lack of capital to support the insurance.
Answering this question would lead to deliberation on how to manage future floods and, alternatively, other nat cat risks. Industry pools are only one of the many alternatives that could be considered when tackling future nat cat risk mitigation.
The final decision needs to be well thought-through by applying all relevant inputs, such as the size of the Slovenian market with its premium volume and specifics, the definition of risk-takers and the role of the government in the scheme.
What are your expectations for this renewal?
Following the turbulence that the reinsurance industry has faced in recent years, whether it be the increased frequency and severity of nat cat events, economic uncertainties (geopolitical uncertainty, inflation, interest rates, etc) or any of the numerous regulatory changes (ESG regulations, IFRS 9/17), we are not seeing a major change in the capital influx, which signals high demand for reinsurance capacity in 2024.
“Sava Re fully understands the importance of transparency and long-term relationships.”
With this in mind, we do expect hardening to continue globally with 1/1 renewals and beyond. This is the only way to secure the sustainability of our industry that investors are looking for and to bring in additional capacity. As always, the level of hardening will depend on the single market development, with significant corrections expected in markets that have recently experienced major nat cat events (Greece, Morocco, Turkey, etc).
Where do you see the biggest opportunities for growth?
One of Sava Re’s main strategic goals is to achieve proper geographical diversification of our international portfolio, where filling our available cat capacity is the key to our future underwriting. Following this and taking into consideration all changes and market corrections, we see opportunities to develop our portfolio in certain EU and non-EU markets (Italy, Portugal, Scandinavia, Spain, etc), Latin America and the Asia-Pacific region.
Our emphasis is firmly on continuing prudent and technical risk assessment with a focus on the bottom line while minimising uncertainties and the unknown.
Do you have any other messages ahead of Baden-Baden?
Although the impact of the August flooding was a severe loss for the Slovenian insurance industry, we see it as an opportunity to revise our coverage offering and a chance to learn, better understand our market exposure and adapt our business accordingly.
Sava Re fully understands the importance of transparency and long-term relationships with our reinsurers and cedants. In this context, we will remain firm, act responsibly and offer continuous support to our partners.
Marko Jazbec is the chief executive officer of Sava Re. He can be contacted at: marko.jazbec@sava-re.si
Main image: Shutterstock / Anze Furlan
