
AI offers new opportunities for tackling increasing SRCC exposures: Swiss Re
Europe’s property market faces increasing nat cat losses and rising SRCC exposures. AI will be key, says Swiss Re’s Mehlhorn.
Key points:
Secondary perils remains a challenge
$100bn+ property losses
AI crucial for risk modelling
“The market is competitive,” said Jens Mehlhorn, head of property underwriting, EMEA at Swiss Re. At the same time, heightened nat cat risk in combination with geopolitical instability means there is more need for protection.
“Over the last 20 years, the number of SRCC claims has increased 3,000%.”
The continent’s market, Mehlhorn told Baden-Baden Today, is impacted by factors like capital inflows, extreme weather events and social unrest, which are reshaping the risk landscape.
One force that has been underestimated, he shared, are strikes, riots and civil commotion (SRCC). “Over the last 20 years, the number of SRCC claims has increased 3,000%,” Mehlhorn said. Social media and the concentration of values in urban centres have amplified unrest, turning local flashpoints into billion-dollar events. “This is something that is developing at a fast pace and needs to be taken into account by the industry.”
Recent events in France and South Africa highlight the point, producing industry losses of $820 million and nearly $2 billion respectively. Their spread and severity reveal an exposure gap not yet fully understood. “We need more granular information, better models, better accumulation control,” Mehlhorn stressed. “Artificial intelligence will help manage the large data volumes. It will also help us be more efficient in underwriting; being faster and providing a more consistent information base for decision-making.”
For Mehlhorn, AI-driven modelling is the next frontier for SRCC and property risk. The frequency and complexity of today’s loss drivers mean reinsurers must integrate vast data streams, combining climate, social and behavioural patterns to anticipate where risk might accumulate.
This growing volatility comes as the reinsurance market becomes more competitive. “We believe prices are still adequate, but these levels attract additional capital, so competition is increasing,” he explained. At the same time, a lot can still happen, as we're not yet at the end of the year and hurricane season is still ongoing.
“The forces impacting the market – geopolitical instability, climate volatility and inflation – have not disappeared,” he said. “Maybe inflation is more contained, but it’s still swelling. Nat cat losses are here, and we expect this year to end again with $100 billion-plus losses for the industry.”
Some governments have recognised the scale of the problem. “Italy has introduced a new law for compulsory nat cat insurance for SMEs and similar discussions are taking place in Greece, Portugal and Germany,” Mehlhorn noted. Such schemes could help close Europe’s protection gap between insured and economic losses.
Beyond social unrest and inflation, the escalation of secondary perils is a defining issue. “Losses from these events are increasing in the range of 7% annually, while economic development is only 2 to 3%,” Mehlhorn said. Hail, flash floods and severe convective storms are becoming more frequent and destructive, driven by shifting weather patterns and urban expansion. “Solar panels, for example, are far more exposed to hail than traditional tiles, while hailstones themselves are growing larger and more damaging,” he said.
To keep pace, Swiss Re is leaning on science and collaboration. “We have a nat cat department with 50 or more scientists who work very closely with our underwriting and claims departments,” Mehlhorn explained. Lessons from each event feed directly into underwriting models, ensuring Swiss Re’s view of risk stays as current as possible. Yet he cautioned that reinsurers cannot diversify away frequent, smaller losses as easily as they can absorb large, infrequent shocks. “With high-frequency losses, there is no efficiency gain when they are transferred from insurers to reinsurers. To solve this burden, maybe we need to go a different way.”
He urges the industry to invest in modelling, data quality and underwriting talent to make the new tools effective. That “different way”, he argues, must involve prevention, adaptation and public-private partnerships. “Every party needs to take part: policymakers with investment into protection measures and building codes, insurers avoiding losses through preparedness and reinsurers covering the residual risk.”
Even with those efforts, Mehlhorn said that secondary perils remained a challenge to the industry. The hailstorms in Italy in 2023, which caused insured losses of $7 billion – the country’s largest ever – showed how quickly exposure can outstrip models. “Accumulation management, modelling and adaptation are absolutely critical, and we need shared risk ownership to manage these risks effectively”, he added.
As extreme weather events, inflation and social unrest converge, Mehlhorn believes the market’s long-term health will depend on its ability to fuse science, data and technology.
Jens Mehlhorn is head of property underwriting, EMEA, at Swiss Re.
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