The northern hemisphere has had to deal with its fair share of disasters over recent weeks with hurricanes Harvey, Irma and Maria causing billions of dollars’ worth of losses both economic and insured.
Though reinsurance pricing has a direct impact on pricing in the insurance industry, Robert De Souza, CEO of
Aon Benfield Australia and New Zealand, told Insurance Business that the recent spate of hurricanes in the Atlantic should not have a material impact on Australia.
“Florida wind is fairly contained to a smaller group of insurers and reinsurers that are involved in that market,” De Souza said. “I am also not sure how much of the loss overall will be insured loss versus economic loss. Clearly, reinsurers and the capital providers will use it to get some sort of pricing increase but I don’t think that will be sustainable or severe.”
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De Souza said that for reinsurance prices in Australia and the region to change, it would take a series of “severe” global losses, or something as damaging closer to home.
“Like Christchurch, for example, there would have to be material local losses within our own environment,” De Souza said.
The recent US hurricanes offer a reminder to the Australian Government and insurance industry on the need for increased mitigation spending to lessen the blows dealt by natural disasters.
“The key for me in terms of insurance and reinsurance is to be focused on mitigation and resilience,” De Souza continued. “We are there to support the economic value and we as an industry need to ensure that we have a sustainable industry but need to make sure our clients have a sustainable future.”
As the frequency and severity of storms increase, and losses related to storms both at home and abroad follow suit, De Souza said that while there is a link between climate change and losses “it is difficult to discern a clear climate change signal” as other aspects influence insured losses.
“There is a climate change impact but we think, talking with our analytics team, that 85% of the increase in cat losses are driven by exposure changes, the remainder is probably climate related,” he explained. “Our business is dealing with the consequences of particular events.
“How those events occur is oftentimes out of our control. Earthquakes are clearly out of our control, but the impact of the hurricanes that have occurred in the US recently, magnified because of urbanisation, wealth, climate cycles, increased development over marsh land, they are the things within our control and are a community challenge.”
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