Urs Baertschi – Swiss Re_

Speaking to The Insurer ahead of the Baden-Baden reinsurance conference, Baertschi said in a video interview that the “frequency and the severity” of secondary perils has increased “significantly”.

Citing figures from Swiss Re Institute, the reinsurance group’s research unit, Baertschi said secondary perils have been accounting for about 65 percent of all natural catastrophe losses over the last decade, with this figure increasing to around 70 percent in 2020.

“We’ve seen very quickly that the exposures have grown. We keep building more and more in areas where there are natural catastrophes, especially these secondary perils,” he explained.

He warned that an increase in loss activity has highlighted insurance penetration issues, even in the more mature European markets, adding that the so-called protection gap has now grown to about $1.4trn globally.

“An unfortunate reality of an actual natural catastrophe event is that you find out very quickly who has insurance and who does not,” he explained.

But Baertschi noted that an increase in costly catastrophe activity is driving an increase in the need and the demand for more insurance products.

His comments came after Swiss Re published research which forecast growing climate risks, urbanisation and digitalisation will drive increased demand for insurance protection, with non-life insurance premiums expected to rise 10 percent above pre-pandemic levels by the close of 2021.

According to Swiss Re, non-life insurance premiums are expected to reach $6.9trn by the end of 2021 and surpass $7trn in 2022 for the first time ever.

Looking ahead to renewals, Baertschi forecast that the ongoing impact of secondary perils, particularly on cedants in the EMEA region, will be a primary topic of discussion.

He said there would be an increased focus on portfolio management, with Swiss Re able to deploy various modelling, risk and predictive analytics to analyse cedants’ existing portfolios and their growth opportunities.

Contract clarity will also dominate discussion. The executive urged the industry at large to maintain “discipline” in wordings, not just for infectious disease but also for emerging loss drivers such as silent cyber.

“There were lots of discussions around this topic last year in the context of exclusions for infectious diseases. It’s important that the industry maintains its discipline around that,” he continued.

“There are other topics that fall into the same category, such as, for example, silent cyber and we are looking to make further progress in the industry around the discipline on those topics.”