Reinsurance Executives Offer Outlook for New Year

Amer Ahmed, CEO, Allianz Re

One of the biggest concerns for the industry—not only for 2014 but for the foreseeable future—is the increasing impact of natural catastrophes. Economic and insured losses are rising due to increasing value concentrations and rising insurance penetration, as well as due to an observed increase in the number of weather-related cat events. In fact, there is a significant gap between economic and insured losses, which raises the question of whether insurers should be doing more to take the strain of such events for society and the economy.

A major challenge, and opportunity, for the industry is to find ways to keep such events insurable at an affordable price for clients. This requires improving awareness of the risks, assessing potential future scenarios where loss patterns may be different, developing products and coverage to encourage the right behaviors toward risk management and mitigation, and engaging with policymakers—for example, on development planning in flood-exposed areas.

Ulrich Wallin, CEO, Hannover Re

The greatest challenges are the continued low interest-rate environment together with the increasing competition for non-life reinsurance business. The greatest opportunities lie in the growth potential of emerging markets and in partnering with insurers in developing new innovative business opportunities.

William Donnell, President, U.S. Property & Casualty, Swiss Re

TRIA is set to expire in 2014, which would be a blow not only to the insurance and reinsurance industry but also to the average U.S. citizen, who will feel the brunt of it in the form of increased taxes. Swiss Re has been publicly advocating support for a continued government backstop because unlike most natural catastrophes, major acts of terrorism remain uninsurable by private markets. Terrorism cannot be modeled with accuracy because terrorists are unpredictable.

The same isn't true for natural disasters, and the U.S. insurance industry simply isn't large enough to take on this scale of risk and put in jeopardy all the other good work that it does in helping people recover during hard times. Public/private cooperation through a government backstop can ensure people in this country remain protected.

While expiration of TRIA is a short-term risk, now is also the time to start taking action on longer-term risks as well. Our Americas CEO Eric Smith said this year that climate change is one of the biggest long-term threats to our industry, and he is right. Over the past several decades we have seen natural catastrophe losses roughly double every 10 years, and this is clearly unsustainable.

The insurance industry, with the data it has at its fingertips and with its ability to evaluate and price risk, is the ideal sector to work with governments to develop new innovative ways to manage the financial impact of severe weather events as well as increase their resilience to them. As an industry we cannot prevent Mother Nature from taking its course, but we can improve how we stand up to and recover from it.