Swiss Re’s Flood Toolkit grows
An increase in losses from unmodelled non-catastrophe events has again illustrated the need for rate increases, Mohit Pande, head of US global property underwriting, Swiss Re, told PCI Today.
Pande defined non-cat events as any unmodelled catastrophe and includes losses from tornados, hailstorms and manmade disasters in this definition.
He accepted that the reason rates remain low is the abundance of capacity in the market. This, he said, means rates will likely remain stable in the next renewal. But he noted that should not prevent the industry pushing for a level that will allow a more sustainable return on equity.
“It just illustrates that there is a further need for an increase in rates,” he said. “After many years of price erosion, we have reached an inflection point and rates need to improve. The margins are now very low in many markets and we need to move to more sustainable pricing levels.”
One way Swiss Re is tackling this challenge is by seeking new opportunities for growth, instead of competing on price in a saturated market. It notes a big opportunity to supply flood reinsurance, for example, complementing initiatives by the National Flood Insurance Program.
It is working with clients to help them better understand this risk, and therefore write it.
“We are excited by the potential for this to increase the total size of the pie,” Pande said.
But, he said, the key to unlocking this market is technical advancements that allow insurers to better understand flood risk—and therefore price it.
Swiss Re has rolled out its Flood Toolkit, designed to map and model flood risk, and to help clients do this.
Pande said the company is already seeing positive results from this. One client, Security First, a Florida-based insurer, has written around $1 million in premiums since it implemented the toolkit in July and a 25 percent take-up rate on flood eligible new business.
“It is about education and developing the tools to give clients the confidence to underwrite the risk,” he said.
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