In the current market environment, there are clearly pressure points in the risk transfer value chain, but the reality is that the price of risk is increasing and this is something that society needs to accept, according to Jean-Jacques Henchoz, Chief Executive Officer (CEO) of Hannover Re.
Speaking this morning at the annual Hannover Re Monte Carlo press breakfast, the CEO of the global reinsurer commented on pressure points between insurers, reinsurers, policyholders and other stakeholders.
Henchoz explained that what is different this year from last, is that the logic of the market has shifted considerably.
“The supply demand imbalance is going on the other side. We went through a number of years of so called soft markets, meaning that there was enough capacity in the system to sustain the risk appetites. This has changed dramatically last year, as you know, and this creates these pressure points,” said Henchoz.
Nevertheless, he continued, “the reality of today’s world is that the price of risk, and I repeat myself, the price of risk is increasing, and the issue is society generally needs to come to terms with that.”
Henchoz stressed that this is something that society needs to accept so that discussions can take place around the best measures to take between mitigation, prevention, climate change adaptation, and then insurance as a response to manage volatility.
“So, I think in this setup in Monte Carlo we are all aware of that, and we accept that there is a price to pay,” said Henchoz.
“But society at large needs to come out of the current denial, and particularly the political denial about the price of risk. And that’s certainly the tension point,” he added.