Swiss Re EMEA CEO sees business opportunity in $15.5bn nat cat protection gap
In order to reduce the $15.5bn protection gap in Europe, Swiss Re is bringing together representatives from the insurance industry, stakeholders from the EU Commission, the EU Parliament and other public sector organisations, and the academia to discuss examples of successful natural catastrophe schemes globally and see what learnings could be transferred to Europe.
In Europe, natural catastrophes resulted in overall losses of $23 billion in 2016. Of these losses, $7.5 billion were insured, according to Swiss Re.
Swiss Re is engaging in an initiative to persuade governments in Europe to create schemes that will enable private re/insurers to expand the coverage of flood and earthquake risks.
Some natural catastrophes such as earthquake and floods have not been traditionally part of the insurance coverage, particularly for individuals, Jean-Jacques Henchoz, Swiss Re CEO Reinsurance EMEA, told Intelligent Insurer. The insurance gap is lower for windstorms and in commercial insurance lines.
“One of the hurdles for the insurance industry is to create scale and diversification of portfolios to make some of these perils insurable. There is also the investment needed to manage these risks, to prevent them, to mitigate their impact,” Henchoz explained.
In many natural catastrophe events in Europe, the government is in charge of footing the bill after a catastrophe, paying for the rebuilding and organising the reconstruction and support.
But budgetary constraints may prevent governments from offering the support and aid needed by the population as quickly as the private sector is capable of, according to Swiss Re
In addition, “the knowledge in terms of how to address and manage these risks sits within insurance companies,” Henchoz said.
There are examples of good schemes in Europe such as Flood Re in the UK and the Norwegian Natural Perils Pool, he noted.
Swiss Re wants to persuade governments and EU officials to work with stakeholders to create similar protection schemes elsewhere in Europe.
When it comes to floods, Central Europe is significantly exposed, particularly Germany and Switzerland, Henchoz noted. Earthquakes are more of an issue in southern Europe, particularly Italy, where frequency of events has increased in the last ten years, he added.
One option to expand the risk coverage is to bundle natural perils with fire insurance policies as it creates a larger risk pool, making disaster insurance more affordable for everyone and increasing access to cover for customers, Swiss Re notes.
The advantage of the compulsory option is that it provides the necessary scale for the private operators to manage this risk.
“The scheme doesn’t need to be compulsory but if it is voluntary it needs to be attractive,” Henchoz explained.
This news story is just a snapshot of a wider report. If you want to know more about Swiss Re’s strategy to increase nat cat coverage in Europe, please click here.
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