" As the year’s big renewal event looms on January 1, property catastrophe reinsurance rates could rise not by the low double digits, but 20, 30, even 50 percent, if Lloyd’s of London insurer Beazley is to be believed. There are two schools of thought on this. One is that the market is dysfunctional with even underwriters struggling for reinsurance quotes. The other is that it is functioning exactly as it should."
Cat Rutter Pooley FT Dec 14th, 2022
Add to that rampant claims inflation, and it looks a little like a "perfect storm" headline. Data, current and predictive, is key to pricing, reserving, and managing claims.
Pooley continues- "The problem, though, is pricing for climate change. Every year, insurers think they’ve got it right. If the past few are anything to go by, they haven’t."
Instech is a good source of intelligence on the companies and data sources that can help e.g. Property Intelligence the where and what: The 50+ companies to know or Climate Change Risk Regulation and Measurement: 22 companies to know
"It’s not just that climate change is a challenge because historic data are inadequate. It’s also that the type of risks that can trip up reinsurers are changing. Secondary perils — wildfires, for example, hail storms or flooding — are a particular problem. Those might not wipe out an insurer’s capital, but can kill off their annual profits — and are, with increasing frequency."
Ecosystem Claims technology companies like CoreLogic and Verisk focus on not just data but the claims systems to repair and restore the property. There are many data management service providers including but not limited to:-
- CoreLogic- manage property data for selling, financing, and protecting property
- Hazard Hub- property risk data
- ICEEYE- global flood earthquake and CAT damage data in near real-time
- KETTLE- house-by-house risk assessment across USA
- LexisNexis- vehicle, ADAS and home data
- McKenzie Intelligence Services Ltd wide range of data sources and data management
- Mitchell- Auto data
- SAFEHUB- building-specific US earthquake damage
- Synectics identity, financial, and fraud data
- Terrafirma property risk data
- Verisk- auto and property data
- WeatherNet- granular and near real-time weather data
- WhenFresh- a wide range of UK property data
Back to the main focus of the FT article. I wonder how the supply and demand mismatch will work its way through. Beazley launched a cash call last month so that it can increase capacity and catastrophy exposure whilst Axis Re, Score and AXA are cutting back.
A capacity crunch may already be here.
If you thought inflation at 11 per cent was bad, talk to the insurers trying to secure cover in the natural catastrophe reinsurance market.