The Russian invasion of Ukraine is likely to only have the impact of a medium-sized natural catastrophe event to the insurance industry, says the CEO of Swiss Re in a new interview.
Speaking to CNBC, Christian Mumenthaler said that while the coronavirus pandemic had ceded and become endemic, the current conflict in eastern Europe was presenting a raft of new problems around economic and food supply chain disruption.
He said: “When the war broke out in Ukraine, it became clear that there were lots of challenges from that from food crisis, energy crisis, potential discontent in the streets, the potential for milder stagflation. That is not the base scenario.”
He added: “The Ukraine war, in itself, is not covered in insurance. We estimate this to be the size of a medium-sized natural catastrophe event for the industry, which means between $10bn and $20bn. What will be more decisive for the industry is, obviously, inflation because this touches the oil reserves and the financial markets, which through US GAAP account standards, go right through your profit and loss.”
Climate change was another issue touched upon in the interview, with Mumenthaler pressed on how, and if, the insurance and reinsurance industries can respond. Mumenthaler said that while the industry was looking at climate change and its effects, it repriced every year meaning that the risk does not ultimately lie with the sector.
He said: “We’re a warning force in all of that. We try to put a price to risk, but we’re not an ultimate taker of the risk.
Mumenthaler was pressed on whether the industry could continue to reprice if adverse weather conditions both increased in frequency and worsened in coming years.
He said: “If you came to a situation like that, it wouldn’t be insurable anymore. As you can imagine, the insurance and reinsurance industry would stop to work, basically, because something like that that happens every year is not insurable event.”