2023-09-11 11:41:04
Monaco (awp/afp) – Faced with the increase in natural disasters, most reinsurers, whose activity consists of insuring insurers, have decided to expose themselves less to certain perils. An understandable choice but which raises the question of the insurability of climate change.
“Some companies were already withdrawing from the insurance market in 2022, but now even the strongest reinsurers are withdrawing, mainly by tightening their guarantees to limit their exposure,” the rating agency’s analysts underlined in a note. Fitch, a few days before the “Rendez-vous de September”, where insurers and reinsurers meet in Monaco until Wednesday.
“More than half of the 20 largest reinsurers maintained or reduced their exposure to natural catastrophes during the January 2023 (contract) renewal period, despite the increase (in contract prices) and an increase in demand” the share of insurers, add the analysts of the S&P agency.
For example, the premiums collected by Axa XL Réassurances, an Axa subsidiary dedicated to this activity, fell by 3% in the first half, to 1.7 billion euros, due to a “strong reduction in exposure to natural disasters”, even if the price increase of 6.3% over the period partly compensated for this hole.
Reinsurers are turning away in particular from so-called “secondary” perils, small or medium-sized losses whose frequency is exploding with climate change, but “still offer significant coverage once morest the most severe losses”, specify the authors of the Fitch rating.
“Any sense”
“There was an underestimate of the frequency of events, and I think we also underestimated the development of populations in different areas”, which increases the cost in the event of a disaster, explains to the AFP Jean-Paul Conoscente, general manager of the damage branch of reinsurer Scor, who sought to review its exposure to natural disasters from 2021.
“Very popular two or three years ago”, according to Robert Mazzuoli, analyst for Fitch, the products which allowed insurers to be compensated as soon as a type of risk, for example hail, exceeded a cost defined at the advance, have completely disappeared.
This type of protection once morest “very high frequency” losses makes “no sense”, argued Thomas Blunck, administrator of the number one reinsurance company, the German Munich Re, during a press conference.
Originally, reinsurers’ systems regarding natural disasters aimed to protect insurers from finding themselves swept away in the slightest extreme event, and not to protect them once morest the volatility inherent in the insurance business, explains Mr. Conoscente to defend the turnaround of the profession.
“Pay the necessary price”
This repositioning of reinsurers is, however, not without consequences for traditional insurers.
“This is one of the criteria which encourages us to have a rather negative outlook, including in France, on the non-life insurance sector,” explains Manuel Arrivé of Fitch.
In this context, and while “the major balances of the industry have been seriously upset”, “there is no question that the exposure (of insurers) will continue to deteriorate”, warns Jean-Philippe Dogneton, general director of the insurer Macif.
Although he says he understands the rebalancing desired by reinsurers, he criticizes its “speed” and “brutality”.
This change was all the more poorly received as some reinsurers “treat their customers badly and are very abrupt”, confirms Mr. Mazzuoli.
To adapt to this new situation, insurers risk having no other choice but to increase prices in turn and better select the risks they cover.
To the point of no longer covering certain areas or risks in France, as is already the case in many countries? “This is what we must avoid,” argues Mr. Dogneton, to Macif.
“We can get insurance anywhere”, but on condition of “paying the necessary price”, estimates for his part Mr. Conoscente at the reinsurer Scor, for whom the problem is “that a large part of the population is not ready to pay the economic price” of climate change.
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