How are the 1.1 renewals are shaping up for Western and Southern Europe?
At Monte Carlo, a common word heard was ‘orderly’. The message for Baden-Baden is that we expect it to be an orderly renewal, which means that the market should find a clearing price in a more normalized fashion, but that doesn’t mean that we won’t be having hard discussions with clients. Those hard discussions are going to fix a lot on topics like strike, riot and civil commotion – we’ve talked a lot about more geopolitical instability and that shows up in insurance too. It’s going to be reflected in discussions around things like property per risk coverage, which we know has been a segment that has been unprofitable for many years, and we’re also going to see it perennially in the discussions around natural catastrophe coverage, because with inflation we expect EUR 4 to 5 billion more of demand in the EMEA region, and we haven’t seen capital coming into the sector, so that’s going to put pressure on leading reinsurers like Swiss Re to step up and help its clients.
We often speak about managing aggregation in property lines, but how do you expect this to evolve in casualty lines?
Aggregation is always brought up in the property context, but as we know, there are events that lead to risk being spread across the casualty class too. A good example of this is PFAS, so-called ‘forever chemicals’. I remember when I joined Swiss Re over 20 years ago, we had a report talking about nanotechnology and nanochemicals, and now, 20 years later, we start to see the first litigation from PFAS-type chemicals showing up. PFAS is an emerging risk as we have seen claims being filed against major manufacturers. Those claims have been primarily filed in the US, but we also see growing awareness for the topic in EMEA. This is the kind of risk that we see could be spread across various casualty lines.
Which other emerging risks are top of mind?
In EMEA, we have been a little privileged not to be prone to the same jury-type awards that we see in the US, but pressures around social inflation and the litigation environment are similar, because some of the frustrations we see against corporations or the public sector are as high in Europe as they are in the US. We see an uptick in litigation funding in Europe, and a jump in class actions.
The second is climate risk beyond the property context. For the month of August, the insured losses caused by storms, hail, lightning and floods in Germany added up to EUR 1.5 billion, according to the German Insurance Association. EUR 550 million of that were for motor claims. Climate is not just a property issue; it’s a casualty issue and it’s also going to show up in other places like life and health, so those are the kinds of risks that make me a little concerned for the future.
And looking out over the horizon, where are you seeing the best growth opportunities?
One is in public private partnerships. One of the markets I cover is Turkey. I’m glad, despite the tragedy, to have been able to support this market in its time of need this year, and if you look at the market loss, which we think at Swiss Re is about $5.3 billion, a good chunk of it will come from the Turkish catastrophe insurance pool. And that demonstrates that compulsory insurance can make a difference. In my past life I worked with governments in Mexico, the Philippines and the Caribbean, and in all of these cases, we used parametric insurance, and it can help.
I think a second area is clearly renewable energy. We expect that investments in green energy will generate additional energy sector-related insurance premiums of almost USD 240 billion by 2035, and our sector has a lot to contribute. Swiss Re has invested more, for example, in new parametric products for solar, and this makes renewable energy more feasible.
And the third area for me is leveraging the data we have – new technology platforms – to develop better insights for insurance companies and drive improved insurance resilience.
