Reinsurance renewal rates need to increase in 2022 as a higher frequency of losses from secondary perils recently are set to drive billions of costs through the industry, Swiss Re’s CEO of Reinsurance Moses Ojeisekhoba suggested today.
Speaking at Swiss Re’s media conference today, held for the week when the industry should have been in Monte Carlo at the annual Rendezvous, Moses Ojeisekhoba explained that recent losses in 2021 suggest a need for higher pricing.
He noted the uncertainty in climate-linked catastrophe events, also highlighting the evident protection gaps in emerging economies related to weather-linked events as well.
Swiss Re revealed some loss estimates for catastrophe events that have occurred already in 2021, putting figures on some of the larger losses, which are mostly secondary peril related, as below:
- Winter Storm Uri – US $14bn to $16bn
- European June hail/storm – US $4bn to $5bn
- European July floods – US $9bn to $12bn
- Henan/China floods – US $1bn to $2bn
Of course there are other secondary peril and catastrophe related losses for the insurance and reinsurance industry to also consider this year, from the ongoing US wildfires, hurricane Ida’s wind and surge damage, and now the flood angle of recent hurricane Ida, suggesting the toll for the industry from catastrophes and severe weather in 2021 looks set to be significant again.
Swiss Re believes that losses from so-called secondary perils are increasing, driven by rapid urbanisation and climate change.
There is less reinsurance and retrocession available to cover these types of events, in particular on the aggregate and frequency protection side, with challenging structures and perils increasingly facing price increases as a result.
These trends are likely to continue, as Swiss Re itself recently that climate risk is going to be a major driver of P&C reinsurance growth, but that it will also drive catastrophe losses much higher as well.
This “dynamically changing risk landscape” means the industry needs to get better at using short observation windows, for forecasting and event scenario simulation, as well as forward-looking risk modelling, to better understand and predict impacts from these type of peril events.
In addition, these secondary peril events are often highly-localised and so challenging to model, the company said.
Thierry Léger, Group Chief Underwriting Officer at Swiss Re, commented that the increased volatility seen from these events is not a surprise, adding that Swiss Re is ready to support clients with capacity.
But speaking about how these secondary peril losses are likely to impact industry pricing going forwards, Ojeisekhoba explained that he feels more rate is required.
“On balance clearly with a greater frequency of events in secondary perils overall, we need to ensure price adequacy,” Ojeisekhoba said.
Adding that, “So certainly from my perspective we’d expect pricing to go up at 2022 renewals.”
From the commentary made it seems Ojeisekhoba was not just referring to Europe, although Swiss Re’s view is that rates are likely to increase there as well as in the United States it would appear.