Advisen Front Page News
- Tuesday, October 19, 2021
Rising reinsurance prices likely to prolong hard market: Munich Re
Advisen
Rising reinsurance prices likely to prolong hard market: Munich Re
By Erin Ayers, Advisen
Reinsurance prices are likely to rise higher for January renewals, driven by “very large losses” from the pandemic, flooding events in Europe, and cyberattacks, according to commentary from Munich Re.
Higher costs come reinsurance renewal time will likely result in “prolonged market hardening,” according to Doris Höpke, member of Munich Re’s board of management.
Devastating floods in Europe this year caused an estimated $53 billion in economic losses and around $10 billion in insured losses, resulting in the costliest event in Germany ever. The gap illustrates a need for insurance to evolve beyond merely compensating for losses and focusing on risk mitigation, according to Höpke, who spoke during a virtual media briefing at the annual Baden-Baden reinsurance meeting in Germany.
In Europe, only 35% of natural catastrophe losses since 1980 have been insured, (approximately $211 billion in insured losses compared to $608 billion in economic losses), she stated.
While Munich Re’s commentary focused on losses in Europe, the conversation on how insurance should evolve spans the globe. The role of reinsurance is “transcending risk transfer,” said the expert.
“This is how I see the future role of insurance: We want to be the central partner for comprehensive risk management, to be a resilience provider, if you will. The basis for insurance, and for risk management of any type, is to monitor and understand risks, and to subsequently develop forward-thinking solutions that can strengthen society in the long term,” said Höpke, adding that it “goes beyond selling policies.”
Reinsurers are evaluating such ideas as compulsory flood insurance for homeowners, or expansion of public-private partnerships for systemic risks like cyber. Preventive measures taken in other European countries show a “clear effect” on losses and are not always complicated undertakings, said Höpke.
In the U.S., Ida would have led to much higher losses had there not been targeted mitigation measures taken after Hurricane Katrina, she added.
Action from the public, the insurance industry, and governments is essential, according to Höpke. Broad risk awareness, better land-use management, building practices, and active prevention can make a difference, she said.
“Otherwise, many people will have no way to cover their losses, or will have to hope they receive state support, even though these losses could have been insured in exchange for a suitable premium,” she concluded.
