It is still “too early” to understand the full impact of COVID-19 on the European reinsurance market in a year marked by a number of catastrophe losses and social inflation on casualty lines, said Bertrand Romagne, chief executive, Europe and chief underwriting officer P&C for AXA XL.
However, he told Intelligent Insurer, reinsurers that have a global footprint, are financially sound and are confident in their ability to manage this phase of the cycle, “continue to offer capacity to their clients”.
In addition to this, Romagne said: “We have seen rate improvements across the market these last few years and the trend has intensified in 2020.
“Although we are seeing a need for rate improvement across all classes of business, it’s been driven by those that have been most affected by losses. The specialty market, with significant market losses in energy and aviation recently, is one of them.
“More recently, we have seen rate improvements on classes that aren’t affected by losses. That is a clear sign of a hardening market, which was expected after a 10-year period of decreasing rates where exposure and losses both went up.
“There has been a significant degree of uncertainty among insurers this year due to COVID-19, and with interest rates likely to remain low for the foreseeable future, we believe we’re likely to see a steady period of rate correction across the market.”
we’re likely to see a steady period of rate correction across the market.” Bertrand Romagne, AXA XLLong COVID
“Although everyone in the industry is talking about COVID-19 it is too soon to fully understand the impact of the pandemic on the market but it is likely that it will contribute to the upward pricing trend we have been experiencing these last few years,” Romagne added.
The pandemic has shone a light on the need for the market to address the clarity of reinsurance coverages such as non-damage business interruption, he said.
“In terms of coverage, reinsurers are already exploring market solutions, such as the CATEX project in France, to provide private-public solutions to the risks associated with communicable diseases.”
Even though the European reinsurance market isn’t as affected by social inflation as the US market, it will also be a topic of conversation during what would have been Baden-Baden week, he added.
“We are likely going to discuss how reinsurers can adapt to this recent development. Essentially, for reinsurers, it comes down to understanding what is happening in the insurance market, and then looking at where the attachment points are and charging appropriately for the increased exposure.”
The perennial topic of natural hazards will again be on the agenda this year. Romagne highlighted a report AXA XL launched on September 9 titled “Optimizing Disaster Recovery: The Role of Insurance Capital in Improving Economic Resilience” in collaboration with the Cambridge Centre for Risk Studies, which “demonstrates the impact of reinsurance on the speed and quality of recovery following natural disasters”.
“Helping communities impacted by disasters getting back on their feet as quickly as possible, and in a better state, is a concrete example of how we make AXA’s purpose ‘to act for human progress by protecting what matters’ a reality,” he concluded.
AXA XL, COVID-19, Insurance, Reinsurance, Catastrophe, Losses, Casualty, Bertrand Romagne, Europe