Demand for risk protection continues to grow as a result of global geopolitical tensions, macroeconomic developments, and climate change, according to a new report from Swiss Re. As a result, the re/insurance industry will need to focus on modelling and contract certainty to ensure adequate pricing, thereby increasing its capacity.
Published ahead the Rendez-Vous de September 2022, Swiss Re shared its views on the current state of the market and possible implications for the upcoming renewals season.
In the report, the industry giant said the increased risk awareness and exposures stemming from the volatility of today’s global landscape will bring heightened demand for insurance protection, with the Swiss Re Institute expecting a US$33 billion increase in commercial premium volumes between 2022 and 2026 due to supply chain reshoring. Moreover, investments in green energy are expected to generate additional energy-sector related premiums of US$237 billion by 2035, while the natural catastrophe sector is forecast to grow from US$35 billion to US$48 billion over the next four years.
In this regard, Swiss Re said it intends to further grow and diversify its natural catastrophe portfolio, adding that the market will need to keep up with growing loss trends and develop capabilities for weather-related risks.
“On top of impacts from COVID-19 and increasing losses from natural catastrophes, the re/insurance industry is now confronted with issues like inflation, risk of recession and geopolitical tensions,” said Swiss Re’s CEO of reinsurance Moses Ojeisekhoba. “As we see cost drivers accelerating in this dynamic risk environment, insurance premiums must be carefully calibrated to keep pace.”
The report also emphasised the need for more frequent adjustments to underwriting practices, urging the industry to focus on quality and margins, as well as contractual clarity.
“To enable the insurance industry to keep up with increasing demand, three factors will be key: evaluating and modelling the evolving trends, ensuring a shared understanding of contractual terms, and generating improved technical margins to reflect the effective risk,” said Thierry Léger, Swiss Re’s group chief underwriting officer.