The property and casualty (re)insurance industry needs to change – and the recent string of natural catastrophes might just be the catalyst that tips the transformation.
In general, casualty lines are underperforming, reserve releases are close to drying up and alternative investment income has been slow to take off. A potential $100+ billion hit as a result of recent natural catastrophes is not likely to help the situation.
spoke to Monica Ningen, managing director and chief property underwriter at Swiss Re, about how pending catastrophe losses might impact the P&C (re)insurance industry.
“In my view, these events are a catalyst that will bring people to the table to recognise how, as an industry, we are at a phase where there must be a transition in order for us to have a sustainable, long-term value proposition,” she said. “We’re looking at $100 billion or more being thrust on the (re)insurance industry, which I think will force companies to take a look at their balance sheets and consider what they’re writing, how they’re writing it, what reinsurance they’re buying and whether it’s fit for purpose for their long-term strategy.
“From an underwriting standpoint, a lot of primary companies will take results hits and will have nowhere to cover catastrophe events with other lines of business. That really brings to the forefront the need for primary rate change, and forces companies to take a look at the deductibles and policy structures they’re offering into the market.”
This need for change comes after years of benign catastrophe events and low catastrophe claims. But the collective “short memories” of the industry and consumers thrust the P&C (re)insurance markets into hot water during the recent hurricane season, and lots of companies are now having to come to terms with major losses.
“When it comes to natural catastrophe losses, it’s not if but when,” Ningen told Insurance Business. “This year collectively has added up to pretty significant losses, but we also had hurricane Irma that reintroduced the scare factor. It reminded people that although we haven’t had a really big event for a long time, it’s still possible.
“Insurance companies often make trade-offs in terms of what they buy, how they buy it and the balance sheet – and sometimes after a long period of no events, they’re willing to make that trade-off because they start to question whether the big event is really possible any more.”
2017 has proven that the big event is very possible and might just be lurking around the corner… but is the industry ready to tackle it head on?
Swiss Re Q3 results hit hard by natural catastrophe losses
and Swiss Re reveal claims estimates post-hurricanes