Switzerland Re invited the company to focus on the underestimated issue of damage (creep loss) after natural disaster events in Europe, saying that this is “a complete development of the industry” and that it shows the need to use the insurance policy to develop and improve the communication in the market area.
Rita Müller, Head Claims Western & Southern Europe, and Balz Grollimund, Head Catastrophe Perils, both at Swiss Re, explained in a press release that the recent increase in losses is rising in the insurance sector after European catastrophes. put the domain name at risk.
Taking as an example the great convective storm and hail damage of July 2023 in Italy, they explain that in this the estimate of losses in the sector started with 2.2 billion dollars, but now it has risen almost at least 6 billion dollars.
Müller and Grollimund wrote: “This moving loss is a unique example of the problem that grips the insurance industry and that we must act quickly to protect the company’s reputation and the stability of the company, ” wrote Müller and Grollimund.
The two authors say that the moving loss is a common phenomenon in the company and that it is a “problem” that the whole company must solve to reduce it. Losses have appeared in many plans of insurance exclusions in Europe in recent years and the problem has gone beyond the experience of hail in Italy, and losses following the 2021 floods in Germany, hail in France in the summer of 2022 and, more recently, the 2023 Turkey/Syria Earthquake.
“When it comes to extreme weather events like the one we saw in Italy, the losses are basically underestimates of the damage exposure, the risk values and the impact of the rise. This has happened to be aggravated by the lack of inspectors, experts, builders and building materials, and the lack of resources for claims management in these demanding times Losses have been observed to increase dramatically for some years, and many of the causes are unclear,” the paper explains, adding that “given how serious the problem is, we believe that the situation should be.”
“This is a problem that affects the entire market,” explained Müller. “As a company, we need to improve our initial estimates of exposure to real losses after an event. Continued underestimation of losses leads not only to underestimating costs, but also to -lost confidence in the region. As we expect future weather events, this pattern of losses is unacceptable and will not last for our company.
Swiss Re believes that the lack of up-to-date data on exposure to risk standards is one of the main reasons for this loss, as outdated data is often used and insurance and commercial clients rely on loss data. related companies. past events to reflect new losses.
“Insurance companies, for example, report very little to insurers about their exposure to hail in Italy. For some we don’t get any information. For others, we only get broad information that covers a large area. Only a few people provide information at the postal level,” explained Grollimund.
In addition, the lack of understanding between the parties in the chain prevents expansion and accuracy, resulting in a lack of complaints, Swiss Re officials said in their document. Stock prices have been a bit of a puzzle in recent years, while the company’s tendency to look to the past to determine what is happening now has not shown up well.
“We have seen the insurers throw their first protection plan for the heavy rains in France in 2022 and the protection system from the event that happened in 2014,” said Müller. “It cannot be done this way. It must be taken into account that the rise in maintenance costs, the increase in the concentration of regulations and all other factors have been improved.” In this example, the 2014 event led to a financial loss of $ 1.4 billion, while the 2022 event reached $ 5.5 billion, according to Swiss Re data “To limit the spread of disaster claims requires cooperation.” Facilitating transparency in key data issues, as seen in the use of new standards for exposure and risk .
A closer look at real costs can also result in more accurate pricing from the insurance and reinsurance market, ensuring that companies are properly compensated for the risks they pose. At the same time, the first security tag should be fresh and cannot rely on data from previous events, especially if they date back many years. Models must take into account “effective risk exposures, including enhanced inflation considerations,” the document explains.
Grollimund says: “It’s about getting some points right from the start. “We need to be diligent from the beginning to the end of the value of the insurance risk. We will be reassessing the insurance premium frequently. And reassessing what the policy actually covers.”