Insurance prices in Europe will have to rise, the chief executive of Lloyd’s of London has warned, as insurers react to the spate of extreme weather events. The global risk profile is assessed by way of global industry exceedance probability curve, which puts into context years with high insured losses such as 2017.
The continent has been hit by a range of natural catastrophes over the past few months, from heatwaves and wildfires to storms and flooding, causing devastation for thousands of people.
Prices for US reinsurance have risen by between 20% and 40% over the past year or so, while prices in Japan have also increased sharply. In Europe, prices have risen by just 10-12%
But while prices for cover in the US have risen sharply over the past year to cover growing weather risks, the European market has been more subdued.
The prices that individuals and businesses pay are often driven by the cost of reinsurance — the cover that insurers buy to protect themselves.
The value of the insights contained in this analysis has never been greater, given the current challenges the global reinsurance industry faces in addressing recent catastrophe losses.
Reinsurance price increases would feed through to primary insurance costs, particularly in areas such as property coverJohn Neal, Lloyd’s chief executive
The extreme weather was changing the way insurers thought about climate risks. “When we look at weather-related losses, the reality is it’s changing and we’ve got to be much smarter in the way in which we assume and measure risk”, Neal added.
The pattern of weather, which is a function of climate change, is changing. I don’t think you can simply rely on past data and say ‘that’s what happened in the past so that’s what will happen in the future.
Over the past 5 years, actual insured losses from natural catastrophes have averaged $101 bn compared to an average of less than $70 bn over the previous 5-year period.
Lloyd’s reported results for the first half of the year, swinging to a pre-tax profit of £3.9bn from a £1.8bn loss in the same period last year as it benefited from both rising insurance prices and better investment returns.
Underwriting profits more than doubled from £1.2bn to £2.5bn as insurance and reinsurance prices rose by 9 per cent across the market and customers bought more cover.
Lloyd’s continued to support profitable underwriting growth, with gross written premium increasing 21.9% to £29.3bn driven by growth from existing syndicates (6.5%), new syndicates (2.2%), foreign currency movements (4.1%) and risk-adjusted rate increases (9.1%). Major claims represented 3.6% of losses in the first half of the year.
by Yana Keller