The Cat 'Nat' * animated many conversations during the 61st edition of the September Rendez-Vous, in Monte-Carlo. Since 1957, the main players in the world insurance market, reinsurers, insurers, and brokers, have been meeting on this occasion to discuss current events of interest to the market. According to Denis Kessler, CEO of Scor, these cat 'nat' could "shake the market" of reinsurance, as Torsten Jeworrek, CEO of reinsurance of world number 2 Munich Re, says "it is a stress test" for the market.

A HARD BLOW BUT “ABSORBABLE BY REINSURERS”

It appears, despite appearances, that over the last 10 years the number of 'nat' cats has been decreasing and that their cost has stagnated. The fact remains that these events are deadly disasters requiring coverage accordingly. According to market experts, these events are complex and uncertain. It is more difficult today to know the distribution of claims and therefore to estimate the extent of insured losses. Initial estimates announce a bill of up to 25 billion euros in insured losses for Hurricane Harvey and up to 54 billion euros for Irma in the United States and the Caribbean.

Globally, the whole market will be able to cover the losses explains Alkis Tsimaratos, EMEA manager of Willis Re, “Harvey is a complex claim but in terms of insured losses, it remains modest and absorbable by the reinsurance industry. Irma is more severe but it is an event that can be modeled, foreseen by reinsurance and absorbable by reinsurers' own funds ”. However, for some, this will have a strong impact on the results of 2017. Indeed, the market is fragmented and the less solid and less diversified players will be less able to absorb the successive shocks of this year.

PRICE STABILIZATION AND "GAP PROTECTION"

If reinsurers wish to capitalize on these events to raise prices, by explaining that the market is global and affects all players, cedants - in Europe in particular - do not want to pay more for events occurring across the Atlantic. The market is recovering, requests have been made from cedants who must reconsider their position given the major disasters of 2017. However, according to Swiss Re, stabilization of prices is to be expected for 2018 - this will still depend on the number of insured losses impossible to determine (with certainty) at this time.

A real issue for insurance players stems from these events. The latter will have to be creative in order to bridge the “protection gap”, that is to say, the difference between economic losses and insured losses. This is considerable in countries with high growth potential such as India or China. But it remains significant in markets considered mature, such as the United States, where the risk of flooding is underinsured, and in Europe, with Italy, for example, where the earthquake risk is underinsured.

What should be remembered from these events and the message from reinsurance players is that underinsurance on a global scale is a real challenge. And above all a potential to be exploited to create new insurable opportunities.