Insurance prices to stay stable despite disasters

12th September 2005, Comments 0 comments

PARIS, Sept 11 (AFP) - Worldwide leaders in the insurance and reinsurance industry are meeting in Monte Carlo this weekend for their annual September conference, preoccupied more by natural disasters than this year's official theme of terrorism.

PARIS, Sept 11 (AFP) - Worldwide leaders in the insurance and reinsurance industry are meeting in Monte Carlo this weekend for their annual September conference, preoccupied more by natural disasters than this year's official theme of terrorism.

Representatives from the world's biggest insurance and reinsurance brokers convened in the Mediterranean principality on Sunday for the five-day 'Rendez-Vous de Septembre', an industry event to discuss recent trends and to look ahead to 2006.

In the wake of Hurricane Katrina in the United States, the focus has shifted to the devastation caused by natural phenomena, overshadowing the worry about attacks on the assets of industrialised countries.

"The debate is continuing on the cause of the increase in the frequency (of natural disasters)," said Olivier du Passage, managing director of reinsurance broker Aon France.

"One thing is certain: human activity and leisure activities are more and more concentrated on the coast, constantly increasing the exposure of insurance and reinsurers to natural disasters," du Passage added.

US insurance specialist Risk Management Solutions, an expert on natural disasters, has estimated that Katrina is set to become the most expensive natural disaster ever covered by the insurance industry.

In its journey across the states of Mississippi, Alabama and Louisiana, the Category 4 hurricane wrought an estimated US $100bn damage (EUR 80bn), with the insurance and reinsurance industry liable for claims of US $35bn, RMS has calculated.

Despite this extra cost, experts see flat or slightly lower reinsurance costs next year.

"I have the impression that prices are fairly stable," said Olivier Muraire, managing director of Ace Europe in France, a unit of Ace insurance group that specialises in coverage for large commercial clients.

According to Yann Le Pallec, head of European insurance at ratings agency Standard and Poor's, the pricing trend for reinsurance contracts is on a downward path.

"All insurers know that the last few years have been very profitable for the reinsurers, who made them (insurers) pay very high prices even though damage claims have been generally good," Le Pallec said.

On the other hand, some experts believe that an increase in third-party civil liability claims, particularly in the United States, is likely to compensate for this fall, keeping prices more or less stable.

Third-party claims are demands by individuals for personal damages from a policyholder and awards from courts have surged in value in recent years.

A lack of consistency in courts also poses problems when calculating premiums.

For the time being, professionals interviewed by AFP believe the reinsurance industry has sufficient capacity to be able to underwrite the risks of catastrophic natural disasters such as Hurricane Katrina.

But evidence of the increasing frequency of extreme natural phenomena is becoming a worry, with any variation in weather patterns of potential concern to the industry.

"The damage can triple depending on the angle taken by the hurricane," said Olivier du Passage from Aon France.

If hurricanes begin to move with greater frequency along the coastline, rather than blowing inland, "that means with the same number of hurricanes, damages could be greater", du Passage explained.

Du Passage said it was "inevitable" that the cost of natural disaster coverage would increase in the United States, with a concomitant effect in Europe despite a relatively low level of incidents there in recent years.

"The fall in Europe (of the cost of coverage) will be lower than the 10-15 percent that was expected," said Daniel Fortuit, director of reinsurance at industry giant AGF.

Denis Kessler, chairman of French reinsurance brokerage Scor, said the impact of Katrina would also have a "major impact" on the structure of the industry, forcing those brokerages that have specialised in natural-disaster coverage to put a brake on their expansion plans.

Copyright AFP

Subject: French news

0 Comments To This Article