Climate change, while acknowledged as a real and existential threat, has been highlighted by Swiss Re as the re/insurance industry’s largest opportunity for growth.
The reinsurer has called for an annual investment of $6.9 trillion to meet current 2030 targets and warns of devastating consequences to the global economy should this target not be achieved.
Meanwhile, the rising cost of secondary perils translates into what’s described as a positive outlook for premiums, with Swiss Re expecting non-life rates to rise 10% above the pre-COVID-19 level by the end of 2021 and for the first time ever surpass the $7 trillion mark in 2022.
Increased digitalisation and interconnectedness are also cited as key drivers to this overall risk landscape.
”There is a clear recognition that claims’ frequency and severity is rising as demonstrated by recent natural catastrophes or cyber incidents,” said Swiss Re’s Chief Executive Officer Reinsurance Moses Ojeisekhoba.
“This means the need for protection is growing, and the industry has important work to do in offering insurance and closing the protection gap.
“Swiss Re’s extensive risk knowledge and very strong capital position allow us to support our clients in their growth ambitions.”
Re/insurers have been warned to prepare for elevated inflation risks, with consumer price inflation pressure expected to remain high in the near term and medical and wage inflationary pressures to continue building up in the medium.
Meanwhile, Swiss Re expects the social inflation trend in the US to continue, driven in part by a litigious environment.
As a result, the reinsurer says pricing must reflect these trends and is preparing for higher claims activity.
”As the risk landscape evolves and risks become more complex, there needs to be an even greater focus on evaluating and modelling these risk trends and ensuring pricing is adequate for the risks taken,” says Swiss Re’s Group Chief Underwriting Officer Thierry Léger.
“Therefore, the importance of underwriting capabilities is further increasing, all the more given the persistent low interest rate environment.
Accordingly, at Swiss Re we continue to focus on scientific, technology- and data-driven underwriting approach.”
This focus is demonstrated by what Swiss Re considers to be significant investments into the upgrading of its data capabilities across the value chain.
Data-driven insights and automated, analytics-driven processes such as machine learning and natural language processing are seen as integral to Swiss Re’s fostering of a more accurate, unbiased underwriting framework.
”We work with leading partners to address problems across the insurance value chain,” Ojeisekhoba adds.
“We are convinced that through these partnerships and by leveraging Swiss Re’s global capabilities and experience, we are best positioned to help our clients maximise value while driving measurable impact.
“This way, we collectively unlock new business models across the industry, push the boundaries of insurance and reduce protection gaps.”