INTERVIEW: NIKHIL DA VICTORIA LOBO, SWISS RE
Increasing protection gap means there is more for the industry to do
If we don’t factor inflation into the exposures, we’ve missed a chance to take care of people when they need our help, warns Swiss Re’s Nikhil da Victoria Lobo.
Perhaps people have lost sight of inflation in recent times, says Nikhil da Victoria Lobo, head of property & casualty reinsurance, Western & Southern Europe at Swiss Re, but with estimates of 5.5 percent inflation in the eurozone this year, it will have a huge impact on casualty lines and loss reserves, alongside property insurance.
“I am very fond of reminding people that our industry needs to step up when bad things happen. If you don’t adjust property and casualty insurance for inflation, you are going to force underinsurance on people when they need insurance protection,” he explains.
Da Victoria Lobo expects conversations around inflation to be a big talking point at Baden-Baden—and not only because it drives the loss side of the equation.
“In my view, it undermines our quintessential value proposition, which is that when bad things happen, our industry has to step up. If we don’t factor inflation into the exposures and into the planning, we’ve missed a chance to take care of people when they need our help,” he warns.
“Public-private partnerships pose an opportunity for the industry as a relevant stakeholder to society as well as commercially,” he adds.
Swiss Re estimated a market loss of $5.3 billion from February 2023’s Turkey earthquakes. A significant portion of that cost will come from the mandatory government-led Turkish catastrophe insurance pool.
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“When bad things happen, our industry has to step up.”
Nikhil da Victoria Lobo, Swiss Re
Da Victoria Lobo says: “It doesn’t address the challenges Turkey will have due to the earthquake, but it does start to close the protection gap.”
He contrasts that with the floods in the Emilia-Romagna of Italy over the summer, with an economic loss of around $10 billion of which only $600 to $700 million was insured.
“That means there is a 94 percent protection gap in an advanced economy. There is clearly something we must do here,” he adds.
Cascading numbers and large losses
For da Victoria Lobo, aside from inflation, two other market trends stand out. First is geopolitical insecurity—he says it shouldn’t be surprising to see a cascading number of strikes and civil commotions. From three years ago in Chile, South Africa and the US, and now in France, strikes will continue to be an issue across the board in all geographies, says da Victoria Lobo.
Second, he addresses climate change. “We’ve been talking for coming on 40 years now about climate change and it is evidenced now in the insurance sector. If you look at the broker estimates around the hail events in northern Italy, you’re looking at losses that range between $2.2 to $2.4 billion. That makes it the largest loss in the Italian market, and it’s coming from a hail event,” he says.
“Public-private partnerships pose an opportunity for the industry as a relevant stakeholder to society.”
On barriers to growth in the industry, da Victoria Lobo discusses data among others.
“About 15 years ago the issue was ‘do we have enough data?’. The challenge now is not do we have enough data, but how do we, in a sophisticated manner, leverage the data we have, and juxtapose data from different sources?
“At Swiss Re we’ve spent a great amount of time and resources building up those data tools for ourselves, and offering them to our clients,” he says.
One such innovation is CatNet, Swiss Re’s web-based natural hazard analysis and mapping tool. It gives clients the ability to put their exposure sets against various catastrophe and weather-related perils, to “get a sense of their portfolio exposure”.
For da Victoria Lobo, more fundamentally, CatNet shows clients how they can drive growth and help society where there are gaps in coverage.
“Coming back to public-private partnerships, there’s a lot we can do as the private sector to close that protection gap and bring insurance and risk management to the hands of our collective end clients.”
Nikhil da Victoria Lobo is head of property & casualty reinsurance, Western & Southern Europe at Swiss Re.
Main image: Shutterstock / PriceM
