From the Publisher
In our last edition Insurance News was blunt in its reporting on the next big challenge to come the industry’s way – reinsurance. After talking to experts we warned about rising premiums, tightening terms and falling capacity heading our way. Now the latest indicator of reinsurers’ reaction to a massive rise in natural catastrophe claims comes from Europe and the US, where most reinsurance contracts came into effect on January 1.
In this edition Wendy Pugh speaks to foreign and local reinsurance leaders about the reasons for, and the local implications of, the January renewals period. Reinsurance reckoning Her report makes it clear we should be bracing on July 1 for some confronting rises and squeezes.
Australia’s devastating floods are just one of a rising number of recent large-scale catastrophes that have severely impacted on reinsurers’ bottom lines. You can review those events inside in our report on last year’s major events – fires, floods, windstorms – and perhaps ponder the fact that natural catastrophes everywhere are increasingly being described as “unprecedented”.
In the midst of all this misery, Lloyd’s Chairman Bruce Carnegie-Brown’s adherence to Benjamin Franklin’s belief that “out of adversity comes opportunity” is positive and powerful. Considering the venerable market’s previous reluctance to move into the 21st century, his exclusive interview with Insurance News shows things are at last happening.
Without knowing what’s in store disaster-wise before June, we can confidently state the reinsurance sector’s long-established relationships with Australian insurers will go some way to easing some of the impacts, but not enough to assuage brokers’ anxieties.
People have got used to insurance being widely and readily available, and people grizzle when premiums rise. Don’t expect them to understand the complexities of global capital, the rising cost of claims, risk exposures and limitations on it. But if they’re a business with a broker or live on a floodplain, in a forest or close to a beach they’ll know they need insurance. Unfortunately, those who will need it most will be the least likely to secure it.
We’ll hear a lot of public debate about expanding the new and untested northern Australia cyclone reinsurance pool to cater for every kind of natural catastrophe, and some muddled debating points about co-insurance, mutuals, government-operated insurers and so on. The next few years may result in a better understanding of how insurance works, but it probably won’t improve the suspicion that something which spreads the cost of risk across the community and around the world just might be a subtly disguised form of (gasp) socialism.
With catastrophes dominating the industry’s attention, two significant non-cat issues haven’t escaped our attention. Those are the JLT’s crushing win in a class action mounted by a group of local councils and an independent review of strata insurance remuneration which finds a simple concept has been rendered incomprehensible. Then there’s information about a very special leadership program for women that tackles a massive workplace issue head-on.
Anonymous comments are dangerous things for publications like Insurance News to allow. So there were some raised eyebrows when we decided to compile two surveys – of insurers and brokers – for this edition and to allow anonymous comments. Trolling and distorted results are all too often the results of anonymity. But in this case we decided brokers and insurers need to be aware of the problems each is causing the other, and that wouldn’t happen if we insisted on publishing who said what.
As it turned out, respondents to both surveys kept it sharply on the ups and downs (mainly downs) they’re experiencing. The uniformity of brokers’ comments backs what we’ve been told a lot in the past couple of years.
Both surveys contain some very valuable insights. Insurers and brokers understand the challenges being faced by the other, and most respondents resisted the opportunity to make meaningless negative points. What we have published is a snapshot of the present situation in insurance, where record claims, higher premiums and insurers’ growing aversion to difficult risks is affecting brokers’ ability to service their clients. It’s not a good position to be in, but it’s the reality we all face. The underlying causes are global as much as they are local, and there are few solutions.
So thank you to those readers who participated in the survey, whether loudly and proudly or anonymously.