WEBVTT - Insurance Europe's Thea Utoft Høj Jensen Talks Wildfire Risks

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<v Speaker 1>Bloomberg, audio studios, podcasts, radio news. Now, insurers are bracing

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<v Speaker 1>for a new era of catastrophe risk in Europe as

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<v Speaker 1>rising temperatures and other extreme weather increase the likelihood of fires, flooding,

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<v Speaker 1>and other disasters. The continent's big insurers have reported strong

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<v Speaker 1>earnings this season, but weren't if the bigger risks ahead.

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<v Speaker 1>Let's take a listen to what executives at Access, Swissery

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<v Speaker 1>and Zoric Insurance of TOL Bloomberg in recent days.

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<v Speaker 2>We have to live with the fact that these files

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<v Speaker 2>are happening more and more.

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<v Speaker 1>This is part of timate change, This is part of

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<v Speaker 1>our daily reality.

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<v Speaker 3>Now we need to understand the risk. We need to say, Okay,

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<v Speaker 3>what's happening here? How can we mitigate the risk. And

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<v Speaker 3>that's an area where we work a lot now within

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<v Speaker 3>different parties, with municipalities, with utility companies.

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<v Speaker 2>I would not say that it's an insurable. I would

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<v Speaker 2>say that the cost of this insurance might be higher

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<v Speaker 2>over time, time and courage levels that might not be

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<v Speaker 2>interesting convenience for the customers.

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<v Speaker 1>So I was Tomo a birl of Axa, Andrews Mamstrom

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<v Speaker 1>of Swiss Rae and Mario Greco of Zurich Insurance, all

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<v Speaker 1>speaking to Bloomberg after their recent results. Let's discuss the

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<v Speaker 1>picture now facing the industry though with taf toy Jensen,

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<v Speaker 1>who is Director General of Insurance Europe, which represents the

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<v Speaker 1>sector at an EU level. Tail, Good morning, welcome to

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<v Speaker 1>our Brussels studio. The picture going into this for insurers

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<v Speaker 1>is complicated. I wonder how are the conversations happening within

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<v Speaker 1>your organization about the concern for these risks going forward?

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<v Speaker 1>How worried are your members?

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<v Speaker 4>So I think fundamentally I agree with a lot of

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<v Speaker 4>the things that the CEOs already indicated here that these

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<v Speaker 4>risks are increasing. Climate change means that we have more severe,

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<v Speaker 4>more more frequent extreme weather events, especially wildfires, as we're

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<v Speaker 4>seeing them at the moment. So that means that we

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<v Speaker 4>need to we need to look at what do we

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<v Speaker 4>doing about those those situations. Ultimately, if you look across

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<v Speaker 4>Europe where we are now, you have a record record

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<v Speaker 4>number of burnt areas across which means that we are

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<v Speaker 4>seeing that we are seeing that these are taking up

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<v Speaker 4>a lot more attention. We do also see that that

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<v Speaker 4>these it's one of them touched on it about it

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<v Speaker 4>being ensurable or not. It's a matter of looking at

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<v Speaker 4>this from a from a perspective of also what are

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<v Speaker 4>we doing to prevent and make sure that we mitigate

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<v Speaker 4>and adapt to address these things, because climate change means

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<v Speaker 4>that we will have to deal with this increasingly, and

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<v Speaker 4>that means that in order to make maintain a capacity

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<v Speaker 4>for the insurance industry to address that or to offer

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<v Speaker 4>our insurances at the fucial level, which we are doing now,

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<v Speaker 4>there are some initiatives that need to happen. It's a

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<v Speaker 4>joint responsibility for municipalities, for governments, but also for insurers

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<v Speaker 4>to guide our clients. But we see there's a lot

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<v Speaker 4>of things that can be done on the preventive side.

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<v Speaker 4>But I think it's very important for me to say

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<v Speaker 4>that the current level of wildfires is manageable for the sector.

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<v Speaker 4>It is something that is it is you have a

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<v Speaker 4>foldable insurance available across Europe for these things. They're usually

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<v Speaker 4>integrated in standard insurance policies and they are there is

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<v Speaker 4>capacity to cover a lot of these things. Okay, I

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<v Speaker 4>think an important thing is also you need to look

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<v Speaker 4>at two things. You need to look at the economic

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<v Speaker 4>loss which is going to be significant the societal loss

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<v Speaker 4>which is going to be significant, but a lot of

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<v Speaker 4>these losses, a lot of these areas that we're seeing

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<v Speaker 4>attacked by wildfires are uninsured. So that means that if

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<v Speaker 4>you look at the insured losses, you need to look

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<v Speaker 4>at what and where is impacted by these wildfires. So

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<v Speaker 4>that's where some of these numbers will not necessarily add

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<v Speaker 4>up one to one.

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<v Speaker 5>And so that then I come to the question around

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<v Speaker 5>under insurance. I mean, as the industry will kind of

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<v Speaker 5>analyze this year of you know, as you say, maybe

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<v Speaker 5>manageable weldfares from some perspectives, but it's still historically very unusual.

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<v Speaker 5>Is going to perhaps be a major year for wilfares.

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<v Speaker 5>How much and how big is the problem of under insurance, But.

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<v Speaker 4>That's difficult to tell because when we don't have the

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<v Speaker 4>numbers yet, we don't have the ability to assess what

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<v Speaker 4>the losses are going to be in the insured losses

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<v Speaker 4>in particular, so that's going to be really difficult to assess.

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<v Speaker 4>I think the important thing is to make sure that

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<v Speaker 4>there's awareness around the insurance is available and that they

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<v Speaker 4>can be covered. But we will have to see what

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<v Speaker 4>that looks like as we get further down the line,

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<v Speaker 4>and it just undermines for me the importance of having

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<v Speaker 4>a long term thinking on that, and we need to learn.

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<v Speaker 4>I don't know if you guys saw, but there are

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<v Speaker 4>the wildfire communication coming up from your commission this spring.

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<v Speaker 4>It already took a lot of learnings from the last

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<v Speaker 4>couple of years. I would not be surprised if we

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<v Speaker 4>take learnings from this year as well in that one.

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<v Speaker 1>Is this a major reset moment then for the industry

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<v Speaker 1>where that reassessment, that rethinking is going to have to

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<v Speaker 1>be bigger than it was in previous years.

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<v Speaker 4>That's not the indication I'm seeing now, because the insurance

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<v Speaker 4>industry has actually ample capacity to absorb also to offer

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<v Speaker 4>up even further. There's much more supply than than there

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<v Speaker 4>is demand. So for me, it's more a question if

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<v Speaker 4>we need to fix the demand side issues. We need

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<v Speaker 4>to make sure that we look at the fact that

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<v Speaker 4>we have more houses that are built in flood and

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<v Speaker 4>fire zones. We have a lot more people who are

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<v Speaker 4>taking up residence in wildfire urban interfacing areas.

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<v Speaker 1>That's changing is that those areas are shifting as well.

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<v Speaker 1>Areas that were once not at risk of wildfires or

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<v Speaker 1>flooding now to climate change are finding themselves in that situation.

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<v Speaker 1>Is that going to mean that there's going to have

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<v Speaker 1>to be a reassessment by ensures of how to ensure

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<v Speaker 1>these properties.

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<v Speaker 4>I think risk, of course, means that you look at

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<v Speaker 4>what can you offer up as a product and what

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<v Speaker 4>is the price for that product. From what we are seeing,

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<v Speaker 4>there's nothing that will indicate that we're not going to

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<v Speaker 4>be able to ensure even these areas in the sense,

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<v Speaker 4>it's just a matter of making sure that if we

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<v Speaker 4>don't address the prevention and if we don't address the

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<v Speaker 4>adaptation around it, the affordability of course is going to

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<v Speaker 4>come under pressure. And that means that there's a very

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<v Speaker 4>big joint responsibility for municipalities. We need to make sure

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<v Speaker 4>that the forests that we have a well planned, well

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<v Speaker 4>thought through. We need to make sure that the way

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<v Speaker 4>we manage them that we have fire lanes, so we

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<v Speaker 4>have fire breaks that we need to address that these

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<v Speaker 4>new risks, yes, they manifest in a little bit in

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<v Speaker 4>a different way, but there's a lot of things that

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<v Speaker 4>traditionally have been looked at and I think we need

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<v Speaker 4>to increase the work around that. So insurans have a

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<v Speaker 4>lot of information where they we already see that they're

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<v Speaker 4>guiding that clines specifically, but also governments and municipalities. So

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<v Speaker 4>we're really looking forward to seeing that you're being commissioned

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<v Speaker 4>coming out with something on this later this year. Also

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<v Speaker 4>on resilience, and we're really looking forward to see what

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<v Speaker 4>they're going to instruct member states to do to increase

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<v Speaker 4>their preparedness and resilience, improve their early warning systems, integrate

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<v Speaker 4>systematically climate change data in the way that they plan

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<v Speaker 4>urban areas, the way they plan infrastructure. Those things are

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<v Speaker 4>long term. What is going to make it possible to

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<v Speaker 4>keep people in short because it will be possible at

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<v Speaker 4>an affordable level to obtain an insurance and it's something

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<v Speaker 4>that we also are very dedicated to do. We've worked

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<v Speaker 4>on this for a long time and we will continue

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<v Speaker 4>to work on it for a long time. It's at

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<v Speaker 4>the end of the day, risk is our DNA.

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<v Speaker 5>Yeah. The issue with premiums though, do you think that

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<v Speaker 5>premiums are going to see another phase of significant increases

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<v Speaker 5>because of inflation. There had been a moment where you

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<v Speaker 5>saw premiums across Europe really sort of rise fairly sharply.

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<v Speaker 5>That has seemed to abate it more recently. Do you

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<v Speaker 5>think as a result of the wildfares and this year

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<v Speaker 5>that you're going to see a lot more pressure on premiums.

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<v Speaker 4>I think premiums ultimately will reflect the risks, So I

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<v Speaker 4>think we'll will have to go and see what that risk,

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<v Speaker 4>how that risk is manifested. But indeed, in increasing risk

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<v Speaker 4>will impact or put pressure on pricing, which is also

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<v Speaker 4>why I'm so keen on this prevention effort, because that

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<v Speaker 4>is one of the most fundamental things we can do

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<v Speaker 4>to keep the prices down, because ultimately risk and premium

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<v Speaker 4>need to go hand in hand.

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<v Speaker 1>What about the question of catastrophe bonds, something that's being

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<v Speaker 1>used in the US, for example, where we have seen

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<v Speaker 1>dramatically increased risks of wildfires in places like California. Should

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<v Speaker 1>we expect to see increased use of these instruments in Europe?

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<v Speaker 4>Catastroph your bonds is a really interesting instrument, and I

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<v Speaker 4>think it's a very helpful instrument on a wider scale

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<v Speaker 4>if you look at Europe as such, I don't see

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<v Speaker 4>a lot of uptake on that, and I think one

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<v Speaker 4>of the fundamental things is also because catastrophe bonds are

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<v Speaker 4>used to increase capacity where there's a squeeze on that

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<v Speaker 4>we have ample capacity. There's a lot of capacity it

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<v Speaker 4>can still be rolled out that's not tapped. So for

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<v Speaker 4>that capacity to be created by a catbonn and not

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<v Speaker 4>by the capacity we already have, I would be very doubtful.

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<v Speaker 4>I think the important thing is to make sure that

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<v Speaker 4>the capacity that's available is getting utilized.

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<v Speaker 1>Given the trajectory though of what we're seeing in terms

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<v Speaker 1>of the increase of both wildfires and flooding and superstorms

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<v Speaker 1>and winters as well, and maybe on a trajectory where

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<v Speaker 1>that looks likely.

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<v Speaker 4>Not from where I'm sitting right now. No, everything we

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<v Speaker 4>hear from from the industry is that there's significant capacity

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<v Speaker 4>to absorb. We also don't see well, there's been a

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<v Speaker 4>conversation around a European mechanism to act as a public mechanism,

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<v Speaker 4>to act as as a backstop, so to speak. We

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<v Speaker 4>also don't see an important need because again it presumes

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<v Speaker 4>that there's a capacity issue and there's not. It's rather

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<v Speaker 4>a matter of making sure that the demand side issues

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<v Speaker 4>are addressed.

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<v Speaker 1>Okay, Tanya, thanks so much for joining us in studio

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<v Speaker 1>this morning. That's Teyutaf toy Jensen, his Director General of

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<v Speaker 1>Insurance Europe