Beat Kramer, Head Property Underwriting EMEA at Swiss Re, has said that he expects reinsurance rate increases to continue at the upcoming January renewals, in part due to the level of catastrophe losses experienced in Europe this year, which are viewed as having been exacerbated by climate change.
Speaking during a media briefing held in advance of next weeks’ Baden-Baden reinsurance meetings in Germany, Kramer asserted that “climate change has arrived in Europe.”
“We know it’s here to stay and science tells us it’s even getting worse,” he told attendees.
As a result, cedants are expected to seek more reinsurance coverage at the January renewals, which is focused in particular on the European market.
This will be partly because many reinsurance programs proved inadequate for this year’s events, and partly because reinsurers like Swiss Re have made progress in closing the catastrophe protection gap, Kramer said.
“All in all, I feel these are ingredients for increasing rates,” he remarked.
This view was shared by Frank Reichelt, Head of Northern, Central & Eastern Europe at the global reinsurance firm, who affirmed that climate change costs are currently not being covered in the insurance and reinsurance industry.
“The effects of climate change are manifesting in greater weather extremes,” Reichelt explained, adding that secondary perils such as floods, wildfires and hail will inevitably rise due to a combination of changing global temperatures and growing wealth and development.
“Reinsurance prices need to rise to cover the rising costs of secondary perils,” he emphasised, and forecast price rises in loss-affected markets at the January renewal period, depending on the size of the losses suffered.
“In loss free markets we expect prices to increase as well, but with the pace of increase decreasing,” Reichelt said during the briefing. “For the reinsurance industry to fulfil its commitment, the prices must be commensurate with the risks covered.”
Issues such as climate change, recent catastrophe losses in Europe, and the possible need for further reinsurance rate increases will surely be topics under discussion at next week’s Baden-Baden meetings, which will be undertaken both virtually and in-person after being cancelled last year.
The most significant event of the year so far for European re/insurers was the major flooding in July, which Swiss Re estimates will cost the industry around $12 billion.
“We expect significant increases in insured losses from flood damage in the UK, France, Germany,” Reichelt said, saying that increases of as much as 200% are possible over the coming years.
However, Thorsten Steinmann, Head Casualty Underwriting EMEA and Managing Director at Swiss Re, noted that price increases are also likely to be seen on the casualty side of business during the January renewals.
“We believe that in those lines where we have seen rate increases in the last few years … that certain price increases will continue,” he said, referring in particularly to larger casualty risks and US exposed business.
“On the other hand, for the middle market segment and smaller risks we do not expect too much of a change there,” he added.
Steinmann also noted that there will be a “big attempt” by Swiss Re to create “more contract clarity” during the next round of renewals, in addition to a focus on limits management.