The expected insured losses from Hurricanes Harvey and Irma could mean that
Munich Re misses its 2017 profit guidance of $3.29 billion-$3.95 billion.
Munich Re said the significant damage Harvey caused in Texas and adjacent US states in August, and the extensive damage Irma has caused in the Caribbean and Florida, will result in high insured losses, which it and the market are unable to quantity at the moment.
Despite good business performance in 2017 to date, the figures for the third financial quarter of 2017 will “probably show a loss,” the reinsurer warned.
Munich Re added that its business and risk strategy ensured that even after such severe natural catastrophes, such as the recent hurricanes, the Group had a sufficiently solid capital base to be able to offer full reinsurance capacity to all its clients. Munich Re is a member of the New Zealand Insurance Council (NZIC).
Auckland-based lawyer and insurance expert Duncan McGill of Duncan Cotterill said despite Munich Re’s announcement the New Zealand market would be more affected by what happened at home than what happened in other areas of the world.
“There is a risk that global (property insurance) premiums may go up. But New Zealand will be assessed on the risk New Zealand faces. It’s not really going to affect us as we’re not hurricane prone, but it will likely affect the Caribbean and southern states (of America),” McGill said.
He added that property insurance becoming unaffordable for the average Kiwi was a concern.
“Touch wood that we don’t have any more natural disasters over the next few years,” he said. “In the event we do, those losses will be reflected in prices increases.”
At the global reinsurance meeting in Monte Carlo in early September,
Swiss Re outlined that each year losses from large natural disasters and extreme weather place a heavy burden on local economies. In 2016, protection gaps from natural disasters and extreme weather events amounted to US$180 billion worldwide, according to estimates by the
Swiss Re Institute.
The reinsurer said several issues contributed to this situation in both developed countries and emerging markets, including a lack of awareness or trust, restricted access to appropriate cover and concerns cover the affordability of policies.
It added that in-depth risk research, paired with new technology, could help the industry develop more efficient and impactful solutions to tackle these issues and close global protection gaps, while opening up new market opportunities for insurers.
Swiss Re said it already offered a number of technology solutions to its clients, including a machine learning-based pricing platform to accurately price risk and enable automated claims payments. This platform, Swiss Re added, could be leveraged for multiple parametric insurance products, such as those covering earthquakes.
The reinsurer added that the challenging industry environment, marked by low interest rates and excess capital, continued to put pressure on both insurance providers and reinsurers. Despite this, Swiss Re intends to maintain its underwriting discipline to preserve long-term sustainability, which would continue to make the reinsurer a “reliable partner for its clients.”
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