Top reinsurers said at the industry’s annual meeting in Monte Carlo that global geopolitical tensions, high inflation, and climate change have increased demand for risk protection and will result in higher premiums.
Reinsurers insure insurers and have raised premiums in recent years in response to higher losses.
“On top of the effects of COVID-19 and rising natural catastrophe losses, the reinsurance industry is now dealing with issues such as inflation, recession risk, and geopolitical tensions,” Moses Ojeisekhoba, Swiss Re’s chief executive officer reinsurance, said in a statement on Monday.
“As we see cost drivers accelerate in this dynamic risk environment,” he continues, “insurance premiums must be carefully calibrated to keep pace.”
Reinsurers meet with their insurance clients in Monte Carlo to finalize contracts ahead of the critical reinsurance renewal season beginning January 1.
S&P analysts predicted last week that rates would rise in the “mid-single digit” percent range, while a Moody’s customer survey predicted double-digit rate increases in US property reinsurance.
Given the strength of inflation, rates could rise by 10% or more in some markets, according to executives from Munich Re and Hannover Re at media briefings on Sunday and Monday. According to Swiss Re’s Ojeisekhoba, rate hikes will most likely be in the “wide range.”
“It’s not an easy time,” said Jean-Jacques Henchoz, CEO of Hannover Re.
“We have a general environment that is very volatile because of the direct and indirect consequences of the (Ukraine) war… inflation is driving many of our discussions here in Monte Carlo.”
Hannover Re highlighted the impact of Russia’s “special military operation” in Ukraine on the aviation and marine markets.
The changing environment, however, offers some opportunities for insurers and reinsurers.
According to the Swiss Re Institute, commercial premium volumes will increase by $33 billion from 2022 to 2026, accounting for approximately 3.3% of global commercial premium in 2021, as companies relocate their supply chains closer to their home countries.
Swiss Re also intends to expand its natural disaster portfolio. According to Swiss Re, this market will grow from $35 billion to $48 billion in the next four years.