Posted on 16 Feb 2009
The world's biggest reinsurer, Munich Re, said global insurance rates need to rise to reflect a projected increase in losses related to natural disasters.
"Price increases in the range of 3 percent annually excluding claims inflation seem to be reasonable,” Torsten Jeworrek, management board member responsible for reinsurance, told reporters in Munich today. “This doesn’t mean we want to raise our profit, our margins won’t change because of that."
The Munich-based reinsurer said on Dec. 29 that worldwide insured losses related to natural catastrophes increased about 50 percent to an estimated $45 billion last year from 2007 while total losses more than doubled to about $200 billion. Munich Re expects global warming and an increase in insured values to lead to higher claims from natural disasters.
Last year’s hurricane season, during which six consecutive named storms including Ike and Gustav blew ashore in the Gulf of Mexico, was the most costly since Hurricane Katrina devastated New Orleans and caused record claims in 2005, according to the Insurance Services Office Inc. Hurricanes in Florida and Texas are getting closer to levels where they may no longer be fully insurable, Jeworrek said.
“Insurers can just supply a certain capacity as covering peak risks such as hurricanes consumes a high amount of capital, thus rates need to rise or limits need to be put in place,” Jeworrek said.
This month’s Australian bushfires, which killed more than 181 people and destroyed more than 450,000 hectares (1.1 million acres) of land, may cost the insurance industry a “mid-three- digit” million-dollar amount, Jeworrek said. Munich Re expects its own costs from that disaster “won’t reach 50 million euros” ($64 million), he added.
Reinsurers help insurers such as Allianz SE and Zurich Financial Services AG shoulder risks for clients.