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"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. "
- Moses Ojeisekhoba, Swiss Re chief executive reinsurance officer
Ahead of the Rendez-Vous de Septembre 2022, Swiss Re has warned the re/insurance market that more focus on modelling and contract certainty is needed to ensure pricing for risk protection is adequate. It noted that geopolitical tensions, inflationary pressures, and climate change pose considerable challenges for society and ultimately the re/insurance industry.
In a press statement, Moses Ojeisekhoba, Swiss Re chief executive reinsurance officer, recognised that the re/insurance industry had proven its “resilience,” supporting clients and society with large insurance payouts, however, the current “cost drivers accelerating in this dynamic risk environment, [means] insurance premiums must be carefully calibrated to keep pace."
Last week, Munich Re warned insurers that a “combination of greater prevention and a higher level of coverage through insurance is important” as businesses begin transitioning towards climate neutrality.
READ MORE: Munich Re predicts insurance demand in the race towards climate neutrality
Likewise, Swiss Re has claimed that there are significant opportunities to “hedge this volatile environment” with increasing risk awareness and exposures resulting in a demand for insurance protection across all businesses and regions.
The reinsurance firm noted that if countries deliver on the intended renewable energy capacity targets, investments in green energy will generate $237bn in additional energy-sector related premiums by 2035.
The natural catastrophe re/insurance market is also forecasted to grow from $35bn to roughly $48bn over the next four years, according to Swiss Re Institute.
Consequently, the market needs to keep up with growing loss trends and develop modelling capabilities for weather-related risks such as secondary perils.
Swiss Re believes the uncertain environment will require more frequent adjustments to underwriting practices.
Thierry Léger, Swiss Re group chief underwriting officer, noted three factors that 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.
Swiss Re believes that focusing on quality and margins as well as contractual clarity in the whole industry will be key in this respect.