Risk averse society means growth for re/insurers

Society is becoming increasingly risk averse creating an increasingly fast growing market for risk transfer products, which reinsurers will ultimately participate in and benefit from, believes Denis Kessler, chief executive of SCOR.

Speaking during this year’s International Insurance Society’s conference, which is being held in London this week, Kessler said he is extremely bullish about growth prospects for the industry partly as a result of this dynamic and partly because of anticipated growth in many emerging markets.

His comments come against a backdrop of concern in some parts of the industry that the emergence of alternative capital will diminish the size of the traditional reinsurance market.

But Kessler notes that this form of capacity is largely focused on peak catastrophe risks. In contrast, he outlines three reasons he forecasts overall growth for the sector in the future.

The first is because he believes some emerging economies will enjoy rapid growth in the future leading to greater demand for insurance products. He notes that a 1 percent growth in gross domestic product results in a much higher level of growth in terms of the requirement for insurance products.

He names several geographical areas as having particularly strong growth prospects. These include several parts of Asia including China, India and Indonesia; Africa; and parts of the Middle East.

He also believes the requirement for property catastrophe coverage will increase partly because of more severe weather, triggered in part by global warming, and partly because governments will increasingly look to shift government-backed catastrophe schemes into the private sector to save money. While alternative capital will certainly play a part in taking on more cat business, traditional reinsurers will benefit too, he said.

Finally, he notes that in a society becoming increasingly risk averse, many new risks are emerging that require a solution from the insurance industry. While cyber represents the most obvious example, he reels off many other emerging risks including solar flares, reputation risk, cloning and genetic engineering.

“The universe of risk is not receding, it is expanding,” he said. “The industry is increasingly being asked to design new products for an increasingly risk averse society. On top of that, the scale of traditional risks is also growing. On that basis I am confident there will be significant growth available for the industry going forward.”