Reinsurers Must Work with Risk Managers Over Natural Catastrophe Issues, Says FERMA
The president of the largest organisation of European risk managers called on reinsurers to work with their ultimate customers, corporate insurance buyers, to develop solutions for the risks highlighted by the spate of natural catastrophes over the last two years.
Opening the 2011 Risk Management Forum of the Federation of European Risk Management Associations (FERMA), president Peter den Dekker said reinsurers needed to understand how business models had changed so they could support insurers in devising innovative solutions to risks that companies face now and will do in future.
At the same time, den Dekker said that risk managers could do more to make insurers and reinsurers comfortable with the risks that they wanted to have underwritten. “The reinsurers complain about complex business models and a lack of information, so we need to learn more about their businesses, their processes, how they use their models and what information they want from us,” he said.
He told the more than 1500 risk professionals gathered in Stockholm for the 2011 forum that the two years since the previous forum had seen an extraordinary series of natural catastrophes, from the earthquake in Chile to floods in Australia, earthquakes in New Zealand, the Japanese earthquake and tsunami, and the latest storms in the United States. There were also the unexpected political upheavals in North Africa and the Middle East, which were continuing.
“Our businesses are so complex that we cannot control every aspect of our supply chains when there is a catastrophe,” said den Dekker. “We are looking to the insurance industry to support us with contingent business interruption policies, and we need the support of the reinsurance industry. To get the sort of financial protection that we need in the face of catastrophes – and to make it a worthwhile business for the insurers and reinsurers – is an issue for us working together.”
He continued: “This year for the first time I attended the Rendezvous de Septembre, the annual gathering of reinsurers in Monte Carlo, and what struck me most was they were doing deals among themselves without realising what the original client expects. We need them to open their doors so we can talk about the issues.”
Finally, den Dekker observed that at Monte Carlo reinsurers seemed to be talking about little but the soft market and prices. “This is a strong indication that reinsurers are trying to talk up prices. If there is a hard market coming, we do not want it to come like a bolt from the blue, and we do not want Solvency II to be used as the rationale for a sudden large rise in insurance rates. We have known about it for a long time now.”
At the same time, den Dekker said, corporate insurance buyers understood that there could be good reasons for rate rises. “I think for what our members are looking for, and price is not the most important criterion. We are looking for capacity and solutions. Those are important things for us.
He concluded: “We ask insurers and reinsurers to understand our businesses better and remember that volatility in insurance prices is not welcome or helpful. For our part we will work to make our underwriters feel that they understand the risks we want them to take. Innovation is a collective activity.”
There are 1521 risk professionals taking part in the forum which will continue through Wednesday 5 October.