Retentions must rise, prices must increase in response to Ian and inflation
Priorities are increased pricing, new structures and, more specifically, higher insurance retentions, says Swiss Re.
The impact of Hurricane Ian underlines just how urgent it is to redress and adjust reinsurance structures, pricing and retentions as the industry moves toward the 1/1 renewal, Paul Murray, chief executive officer Reinsurance Asia, Swiss Re, told SIRC Today.
He noted Swiss Re had seen the “very prominent” impact of Ian in its Q3 results. He acknowledged that reinsurers have an important role helping society by absorbing volatility after big catastrophic events and helping create resilience—but he stressed that Swiss Re is a shareholder-owned company.
“We take these risks, and we suffer from losses periodically. But we need to make good money over a reasonable period of time. Ian underlines the importance of redressing the priorities as we go into the next renewal,” Murray said.
He said that while Ian represents a single severe event, the frequency of smaller and medium-sized events in the past few years causing an accumulation of losses is a concern for the industry. “Just this year, a number of records have been broken again.”
In Asia specifically, records have been broken in India and China this year. In Australia, this year’s catastrophic flooding has been deemed the costliest and the fifth biggest nat cat event to hit the continent. Hurricane Ian also broke records, he notes: its pace of acceleration before it made landfall was faster than that of any other storm previously.
“We’re in a world where the level of risk has increased materially, and we think that phenomenon is here to stay. So as we go into this renewal this needs to be reflected in the prices we charge,” he said.
A sneak preview: more exclusive content and interviews inside
A sneak preview: more exclusive content and interviews inside
Engage with governments to better tackle cat risk: Guy Carp
Recent events highlight the need for more dialogue between re/insurers and governments.
The past year has been another expensive one for catastrophic events, which may cost the industry more than $100 billion. Yet while Hurricane Ian will probably be the most significant event, its magnitude should have been no surprise, Karl Jones, head of global strategic advisory, Asia-Pacific at Guy Carpenter, told SIRC Today.
The impact of Hurricane Ian is yet to be fully realised, but Jones does not believe it will be an industry-changing event in the way that Hurricane Andrew was. This is largely because such an event is well within the predictions of risk models.
“I don’t think it’s going to be of the same industry-changing nature as Andrew. Florida is one of the most modelled territories on Earth, so it should not be a surprise that we’ve had a major hurricane.
“That said, Florida has some unique challenges which put pressure on re/insurance, so it will naturally have some impact,” he said.
