In the new report, the Swiss Re Institute states that increased risk development increases the need for insurance coverage, but also requires greater focus from reinsurers in food and model risk and that pricing is adequate for the risk.
“There is a clear recognition that the frequency and severity of claims is increasing, as shown by recent natural disasters or online incidents. This means that the need for protection is increasing and the industry has an important job to do in offering insurance and closing the protection gap, “said Moses Ojeisekhoba, Reinsurance Director at Swiss Re. “Swiss Re’s extensive risk knowledge and very strong equity position enable us to support our clients in emerging markets.
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The Swiss Re Institute also warned that climate change posed the greatest long-term threat to the world economy. According to the reinsurer, the economy is expected to lose up to 18% of GDP due to climate change by 2050 if no mitigation measures are taken. In addition, digital spelling and interconnection with the current risk landscape is increasing.
As a result, the Agency considers that the greater need for insurance coverage results in a positive outlook for premiums, as they need to reflect increased risk. In particular, the agency expects non-life insurance premiums to rise by 10% above COVID-19 levels by $ 6.9 trillion by the end of 2021 and to exceed US $ 7 trillion in 2022 for the first time.
Swiss Re also advised reinsurers to prepare for increased inflation risk, but inflationary pressures are expected to remain strong in the near future. Meanwhile, inflationary pressures in medicine and wages, particularly relevant for damages, are expected to increase over the medium term.
“As the risk landscape develops and the risk becomes more complex, even more emphasis needs to be placed on assessing and shaping this risk development and ensuring that pricing is adequate for the risk taken,” said Thierry Léger, Head of Swiss Re Group.
“Therefore, the importance of underwriting capacity increases even further, in light of the persistent low interest rate environment. Accordingly, at Swiss Re, we continue to focus on scientific, technical and data-driven underwriting. “
Ojeisekhoba added: “We are working with leading partners to address issues through the insurance value chain. We are convinced that with these collaborative projects and by utilizing Swiss Re’s international capabilities and experience, we are best placed to help our customers maximize value while driving measurable impact. In this way, we jointly open up new business models throughout the industry, push the limits of insurance and reduce the scope of protection. “