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Natural disasters : the reinsurers adapt by changing strategy

by

Charles Mathieu

14 August 2019 13:30

The reinsurance industry has adjusted by 2019 to cope with the increase of insured damages related to natural disasters of the past two years. It is this that revealed S&P Global Ratings in its latest report, Global reinsurers aim to rebalance their natural catastrophe exposure.

The firm’s rating highlights that the losses related to natural disasters in 2018 have been 50 % higher than anticipated. In addition, the rate of disaster affecting the properties has increased between 15 % and 25 %.

Increase of the risk exposure

Thus, in 2019, the reinsurers have decided to increase their exposure to disaster risk by increasing their premiums during the round of election for the April and June/July.

“Most of the 20 largest reinsurers have chosen to increase their exposure to the capital to take advantage of better conditions. A few have encountered a number of defensive measures, allowing them to further reduce their exposure to risk, ” said S&P.

A volatility to predict

This increase in the exposure of the reinsurers would increase their profits, but could also have negative consequences, according to the firm’s credit rating.

“Although the global reinsurers have maintained their underwriting discipline, we expect that earnings volatility could be higher than historically observed. The sector remains resilient with respect to extreme events, but we expect that a greater loss that would affect the industry would lead to consequences more important for reinsurers “, one can read in the report.

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