Swiss Re also expects more opportunities for re/insurers due to a combination of improving insurance demand and growing exposures.
Despite the cancellation of the Rendez-Vous de Septembre 2020 in Monte Carlo, Swiss Re continues to host its established media events, but in a virtual format. Today, Swiss Re shares its view on the upcoming renewals season.
Swiss Re expects prices to continue to increase driven by the combination of lower interest rates and the need for prices to cover increasing loss trends as demonstrated by recent experience across the world.
Hurricanes are frequently affecting areas where exposures have grown as a result of wealth accumulation. This leads to increasingly severe losses, as demonstrated in the past few years. 2020 is forming up to be no better.
The current Atlantic hurricane season is the first on record to see nine tropical storms forming before August and 13 before September. The situation is further aggravated by the higher frequency and severity of secondary perils, such as floods and wildfires, leading to rising claims and highlighting the need for insurance protection.
While low interest rates have been affecting the industry's profitability since the global financial crisis, further rate cuts aimed at fighting the economic impact of COVID-19 will only exacerbate this problem. In "Low interest rates: the new norm and what it means for insurers", Swiss Re Institute concludes that, to achieve a reasonable return on equity through 2021, non-life insurers in G7 markets need to improve underwriting margins by as much as 7-12 percentage points to compensate for lower interest rates.
Swiss Re's Chief Executive Officer Reinsurance Moses Ojeisekhoba said:
"Even before the COVID-19 crisis, most major markets were operating at below-average profitability. To be able to address the growing need for insurance protection in a sustainable way, further price increases across all lines of business are clearly needed."
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