Global reinsurance giant Swiss Re said this morning that more rate hardening is expected across the market, in order to accurately reflect higher risk exposures and growing demand for protection.
The company said that it anticipates a rise in both demand and prices, with a continued uncertain environment, but also growth opportunities expected to come.
Because of factors including global geopolitical tensions, macroeconomic developments and climate change, Swiss Re believes the reinsurance industry must focus on “modelling and contract certainty” to make sure that pricing is adequate for the risks being assumed and allowing the market to increase its capacity to support them.
Swiss Re’s Chief Executive Officer Reinsurance, Moses Ojeisekhoba, commented this morning “On top of impacts from COVID-19 and increasing losses from natural catastrophes, the re/insurance industry is now confronted with issues like inflation, risk of recession and geopolitical tensions.
“We have proven our resilience by supporting clients and society throughout the last years by paying large insurance claims. As we see cost drivers accelerating in this dynamic risk environment, insurance premiums must be carefully calibrated to keep pace.”
Swiss Re is targeting additional growth in natural catastrophe reinsurance business, with and forecasts the catastrophe market will grow to to grow to about USD 48 billion over the next four years, from USD 35 billion.
But, “The market needs to keep up with growing loss trends and develop modelling capabilities for weather- related risks such as secondary perils,” the reinsurer cautioned.
“Climate change is increasingly manifesting itself with no end in sight,” the company warned, a key factor in predictions for higher pricing and demand in nat cat risks.
The current market environment demands a disciplined approach, on the underwriting side, the reinsurer believes.
Quality and the ultimate margin of reinsurance business written will be key, while contractual clarity will also help the industry to grow.
Swiss Re’s Group Chief Underwriting Officer Thierry Léger commented, “To enable the insurance industry to keep up with increasing demand, three factors will be key: evaluating and modelling the evolving trends, ensuring a shared understanding of contractual terms and generating improved technical margins to reflect the effective risk.”
Ojeisekhoba added, “In times like these, when challenges manifest themselves in the form of heightened risks, we at Swiss Re are well positioned to navigate these turbulent times together with our clients.
“By leveraging our risk knowledge, capital strength and client franchise, and providing innovative solutions we continue to create value for our clients. This is supported by our leading data and analytics capabilities, which will play a key role for future success.”