In an interview with Reinsurance News, Matt Westhoff, Head of North American Commercial Property at Beazley, outlined the company’s robust strategy to navigate the complex landscape of climate change and its implications on the re/insurance market.
Addressing the uncertainties of climate change, Westhoff underscored Beazley’s commitment to a forward-looking model, emphasising a proactive approach.
He stated, “There’s lots of work being done behind the scenes. We’re transitioning to a forward-looking model by taking a more proactive versus reactive approach.” This shift indicates Beazley’s dedication to staying ahead of emerging risks rather than merely responding to them.
The interview shed light on Beazley’s meticulous pricing strategy, examining each peril, asset, load, and location individually.
Westhoff stated, “It’s extremely important for us to not rely on a single model. We develop our own independent view of risk.” This emphasis on independence reflects Beazley’s recognition of the de-commoditisation of the property market due to climate risk, presenting an opportunity for the company to leverage its unique perspective.
Discussing the impact of climate change on storms, Westhoff highlighted a concerning trend, noting, “We’re seeing CAT losses grow by 5-7% annually over the past three decades.”
He pointed to the severity of extreme weather events, citing 2022’s catastrophe losses of around 125 billion as the fourth highest since 1970. The challenge of severe convective storms was underscored, with SCS accounting for 60% of insured CAT losses in the market for the first nine months of 2023.
On the specific issue of Hurricane Otis in Mexico, Westhoff downplayed its potential global impact on the property cat market, stating, “I don’t see it really moving the global property cat market. It would be more of a domestic impact.”
He acknowledged that domestic insurers in Mexico and those seeking coverage in the region would feel the impact, but the global market would likely remain relatively unaffected.
Looking ahead to property reinsurance ahead of the January renewals, Westhoff acknowledged the drastic correction seen in 2023.
He anticipated a more stable environment in the upcoming year, but cautioned, “climate risks will continue to put pressure on reinsurance rates for the foreseeable future.”