Billion-euro catastrophe losses on the rise: Munich Re
Insured losses in excess of €1 billion ($1.67 billion) from individual events are increasingly common, adding to the list of pressures facing the insurance industry, Munich Re says.
In Europe this year at least seven natural catastrophes have run up separate losses of at least €1 billion, among them the Turkey/Syria quake in February, storms in Germany in June and flooding in Slovenia, Austria and Croatia in early August.
“Insurance markets currently have to cope with growing uncertainty: inflation, geopolitical crises, rising cyber risks, and an increased frequency and severity of natural events,” Munich Re says.
“Also in Europe…we have seen an unprecedented series of natural catastrophe losses exceeding the 1-billion-euro mark this year. These changes will be at the centre of the upcoming renewal discussions.”
The reinsurer says uncertainties call for disciplined underwriting and notes that in insurers’ portfolios, still-palpable price increases are producing higher exposure and loss expectations alike.
“This is particularly true for the motor book in the underwriting years 2021 and 2022,” Munich Re says.
“In order to offer suitable cover for future losses, in addition to general inflation, insurers and reinsurers need to factor in segment-specific inflation factors – such as higher prices for replacement car parts, higher construction costs, wage increases. Inflation will remain a key feature in pricing.”
Munich Re says the region is also facing worsening civil unrest, something that the industry should keep an eye on.
The vigil in Nanterre, France, for a teenager shot dead by the police and later escalated into prolonged violent protests against the police in several cities, caused economic losses in excess of €1.1 billion ($1.84 billion).
“Civil unrest has worsened over the past several years, both globally and in Europe. These risks are only insurable as local events under property insurance and on the basis of individual coverage designs,” Munich Re says.
“Further, they must be assessed using a stringently technical underwriting approach. In terms of monitoring this dynamic risk, it is essential that the potential accumulation risk be continually evaluated.”