Disaster resilience represents an opportunity, says Allianz Re CEO

Re/insurers are duty bound to help mitigate disaster risks, but this does not mean that the industry cannot benefit at the same time.

This is according to Amer Ahmed, the chief executive officer (CEO) of Allianz Re, who believes that partnering with government bodies to help mitigate disaster risk provides an incredible opportunity for re/insurers.

“Managing risks is our primary role in society. Partnering with government bodies to reduce risk exposure would help create more diversification in our industry, which is ultimately better from a cost of risk point of view,” he explained.

With a lack of growth in developed markets and an over-abundance of capital, Ahmed believes this could be the perfect solution.

“If we can get more risk into the system, we can put that excess capital to better use instead of having it supress prices and fighting for the finite amount of risk currently in the system,” he said.

“The challenge for the reinsurance industry is to find risk for that capital to be utilised against. We need to make reinsurance more acceptable to individuals, to businesses and to governments. The opportunities for different types of risk transfer are plentiful.

“The most significant challenge we face is the change in the risk landscape. The industry has a good understanding of the inherent hazard but insured values are constantly changing. It is astounding how quickly insured values are growing in the developing markets. Putting these two factors together is the challenge.”

Ahmed explained that recent analyses, undertaken by reinsurers, have charted the amount of insured damages and economic damages from natural catastrophes over the last 20 years. The findings depict a worrying trend: a sharp increase in losses.

A recent joint study, undertaken by the United Nations office for disaster risk reduction (UNISDR) and catastrophe modelling firm AIR Worldwide, found that economic losses stemming from disasters are unlikely to be reduced from present levels of $240 billion per year.

Jerry Velasquez, UNISDR’s chief of advocacy and outreach, said: “This study tells us that the way we do development is the reason why economic losses are so high. Development drivers are stronger drivers of the increase of risks than hazards themselves. In order to limit economic losses in the future, we need to improve urban planning and make economic growth resilient.”