Swiss Re eyes growth in Europe

The protection gap in Europe remains large in many countries—but this is where growth can be generated for reinsurers as governments look to solve this challenge, as Claudia Cordioli of Swiss Re tells Baden-Baden Today.

There is plenty of growth opportunity in Europe for the re/insurance sector as certain governments are warming up to the idea of cooperating with the private sector to offer catastrophe risk solutions to their populations, according to Claudia Cordioli, head of reinsurance for Western & Southern Europe at Swiss Re.

A series of wildfires in Greece during the 2018 European summer heatwave began in the coastal areas of Attica in July; the catastrophe killed around 100 people and is dubbed the second-deadliest wildfire in the 21st century.

In Portugal, as August temperatures climbed to nearly 47° Celsius in some areas, more than 2,000 people were reportedly evacuated in the Algarve region as the wildfire charred over 21,000 hectares of forest and destroyed several homes.

Also, in August, a series of earthquakes hit southern Italy, the strongest measuring 5.1 in magnitude and causing walls to collapse.

France this year has been hit again by severe drought in the summer, and deadly floods in early October in the south west part of the country.

Natural catastrophe events in Europe follow a similar pattern, with often very high economic losses while insured losses are low, said Cordioli.

“There is a huge protection gap in those countries and we are discussing with market players, and with regulators and clients, how to best address it,” she added.

Governments in Italy and Greece are debating how to involve the private insurance industry in the protection of the population against natural disasters. One option being discussed in Greece is introducing mandatory property insurance for residential buildings.

In Portugal the debate is around creating a risk pool solution through a public-private partnership.

In Italy, apart from mandatory motor insurance, buying protection is not widespread. Less than 2 percent of residential buildings are insured against earthquake, even though the country’s exposure to this risk is large.

“People don’t buy insurance for financial reasons but also because the risk awareness is rather low,” Cordioli noted.

After major events, the government offers emergency relief and rebuilding support, but the response tends to be late and the agreed financial help often does not fully reach the affected individuals, she explained.

The population tends to rely on government support but pressure on public finances is making the government rethink its approach. In 2017 it launched a fiscal incentive programme for the purchase of household cover including earthquake and flood protection.

However, if only people in the most exposed areas buy earthquake protection it will not be affordable for them, Cordioli said.

“This is why the industry is pushing to find a public-private partnership solution that offers the required protection to the population at a reasonable price,” she noted.

“If we manage to put in place an insurance scheme that covers very exposed and less exposed areas this will allow for lower prices. At the same time, we need to raise the risk awareness within the population,” she added.

Triggers

Parametric insurance may be part of the solution. “There are public indices that can serve as triggers. Such a solution is being discussed to offer relief to the affected part of the population after an event,” Cordioli noted.

Parametric insurance can be purchased by individuals, by enterprises or by the government. “We have developed parametric insurance for individuals, for example in Turkey, which is exposed to earthquake risk, and we are discussing such a solution for Israel and Italy,” Cordioli said.

“Technology can be a powerful tool to improve our delivery to customers and create higher awareness of risks, and serve as an information tool,” she added.

The re/insurance sector faces a similar opportunity to grow in flood protection. Italy is among the European countries that are affected regularly by floods, with a significant impact on the population and on businesses.

“We launched a new flood model for Italy last year and we are currently rolling it out to our clients,” she added.

Another country with a high risk of flooding in Europe is the Netherlands, where two-thirds of the country’s area is vulnerable to flooding and around 17 million people are subject to this risk.

“We believe that flood risk in the Netherlands is insurable,” Cordioli said, noting that the insurance industry has been reluctant to offer cover in the past.

“We need to find a solution for it as an industry. As long as it is affirmative, explicitly defined as a cover, the insurance industry should be able to offer protection.”

While more discussions with stakeholders may be needed, Cordioli is confident that solutions can be found. “There are lots of opportunities to grow. Our industry just needs to be bold,” she concluded.

Claudia Cordioli is head of reinsurance for Western & Southern Europe at Swiss Re. She can be contacted at: claudia_cordioli@swissre.com