Speaker 1: Bloomberg, audio studios, podcasts, radio news. Now, insurers are bracing
Speaker 1: for a new era of catastrophe risk in Europe as
Speaker 1: rising temperatures and other extreme weather increase the likelihood of fires, flooding,
Speaker 1: and other disasters. The continent's big insurers have reported strong
Speaker 1: earnings this season, but weren't if the bigger risks ahead.
Speaker 1: Let's take a listen to what executives at Access, Swissery
Speaker 1: and Zoric Insurance of TOL Bloomberg in recent days.
Speaker 2: We have to live with the fact that these files
Speaker 2: are happening more and more.
Speaker 1: This is part of timate change, This is part of
Speaker 1: our daily reality.
Speaker 3: Now we need to understand the risk. We need to say, Okay,
Speaker 3: what's happening here? How can we mitigate the risk. And
Speaker 3: that's an area where we work a lot now within
Speaker 3: different parties, with municipalities, with utility companies.
Speaker 2: I would not say that it's an insurable. I would
Speaker 2: say that the cost of this insurance might be higher
Speaker 2: over time, time and courage levels that might not be
Speaker 2: interesting convenience for the customers.
Speaker 1: So I was Tomo a birl of Axa, Andrews Mamstrom
Speaker 1: of Swiss Rae and Mario Greco of Zurich Insurance, all
Speaker 1: speaking to Bloomberg after their recent results. Let's discuss the
Speaker 1: picture now facing the industry though with taf toy Jensen,
Speaker 1: who is Director General of Insurance Europe, which represents the
Speaker 1: sector at an EU level. Tail, Good morning, welcome to
Speaker 1: our Brussels studio. The picture going into this for insurers
Speaker 1: is complicated. I wonder how are the conversations happening within
Speaker 1: your organization about the concern for these risks going forward?
Speaker 1: How worried are your members?
Speaker 4: So I think fundamentally I agree with a lot of
Speaker 4: the things that the CEOs already indicated here that these
Speaker 4: risks are increasing. Climate change means that we have more severe,
Speaker 4: more more frequent extreme weather events, especially wildfires, as we're
Speaker 4: seeing them at the moment. So that means that we
Speaker 4: need to we need to look at what do we
Speaker 4: doing about those those situations. Ultimately, if you look across
Speaker 4: Europe where we are now, you have a record record
Speaker 4: number of burnt areas across which means that we are
Speaker 4: seeing that we are seeing that these are taking up
Speaker 4: a lot more attention. We do also see that that
Speaker 4: these it's one of them touched on it about it
Speaker 4: being ensurable or not. It's a matter of looking at
Speaker 4: this from a from a perspective of also what are
Speaker 4: we doing to prevent and make sure that we mitigate
Speaker 4: and adapt to address these things, because climate change means
Speaker 4: that we will have to deal with this increasingly, and
Speaker 4: that means that in order to make maintain a capacity
Speaker 4: for the insurance industry to address that or to offer
Speaker 4: our insurances at the fucial level, which we are doing now,
Speaker 4: there are some initiatives that need to happen. It's a
Speaker 4: joint responsibility for municipalities, for governments, but also for insurers
Speaker 4: to guide our clients. But we see there's a lot
Speaker 4: of things that can be done on the preventive side.
Speaker 4: But I think it's very important for me to say
Speaker 4: that the current level of wildfires is manageable for the sector.
Speaker 4: It is something that is it is you have a
Speaker 4: foldable insurance available across Europe for these things. They're usually
Speaker 4: integrated in standard insurance policies and they are there is
Speaker 4: capacity to cover a lot of these things. Okay, I
Speaker 4: think an important thing is also you need to look
Speaker 4: at two things. You need to look at the economic
Speaker 4: loss which is going to be significant the societal loss
Speaker 4: which is going to be significant, but a lot of
Speaker 4: these losses, a lot of these areas that we're seeing
Speaker 4: attacked by wildfires are uninsured. So that means that if
Speaker 4: you look at the insured losses, you need to look
Speaker 4: at what and where is impacted by these wildfires. So
Speaker 4: that's where some of these numbers will not necessarily add
Speaker 4: up one to one.
Speaker 5: And so that then I come to the question around
Speaker 5: under insurance. I mean, as the industry will kind of
Speaker 5: analyze this year of you know, as you say, maybe
Speaker 5: manageable weldfares from some perspectives, but it's still historically very unusual.
Speaker 5: Is going to perhaps be a major year for wilfares.
Speaker 5: How much and how big is the problem of under insurance, But.
Speaker 4: That's difficult to tell because when we don't have the
Speaker 4: numbers yet, we don't have the ability to assess what
Speaker 4: the losses are going to be in the insured losses
Speaker 4: in particular, so that's going to be really difficult to assess.
Speaker 4: I think the important thing is to make sure that
Speaker 4: there's awareness around the insurance is available and that they
Speaker 4: can be covered. But we will have to see what
Speaker 4: that looks like as we get further down the line,
Speaker 4: and it just undermines for me the importance of having
Speaker 4: a long term thinking on that, and we need to learn.
Speaker 4: I don't know if you guys saw, but there are
Speaker 4: the wildfire communication coming up from your commission this spring.
Speaker 4: It already took a lot of learnings from the last
Speaker 4: couple of years. I would not be surprised if we
Speaker 4: take learnings from this year as well in that one.
Speaker 1: Is this a major reset moment then for the industry
Speaker 1: where that reassessment, that rethinking is going to have to
Speaker 1: be bigger than it was in previous years.
Speaker 4: That's not the indication I'm seeing now, because the insurance
Speaker 4: industry has actually ample capacity to absorb also to offer
Speaker 4: up even further. There's much more supply than than there
Speaker 4: is demand. So for me, it's more a question if
Speaker 4: we need to fix the demand side issues. We need
Speaker 4: to make sure that we look at the fact that
Speaker 4: we have more houses that are built in flood and
Speaker 4: fire zones. We have a lot more people who are
Speaker 4: taking up residence in wildfire urban interfacing areas.
Speaker 1: That's changing is that those areas are shifting as well.
Speaker 1: Areas that were once not at risk of wildfires or
Speaker 1: flooding now to climate change are finding themselves in that situation.
Speaker 1: Is that going to mean that there's going to have
Speaker 1: to be a reassessment by ensures of how to ensure
Speaker 1: these properties.
Speaker 4: I think risk, of course, means that you look at
Speaker 4: what can you offer up as a product and what
Speaker 4: is the price for that product. From what we are seeing,
Speaker 4: there's nothing that will indicate that we're not going to
Speaker 4: be able to ensure even these areas in the sense,
Speaker 4: it's just a matter of making sure that if we
Speaker 4: don't address the prevention and if we don't address the
Speaker 4: adaptation around it, the affordability of course is going to
Speaker 4: come under pressure. And that means that there's a very
Speaker 4: big joint responsibility for municipalities. We need to make sure
Speaker 4: that the forests that we have a well planned, well
Speaker 4: thought through. We need to make sure that the way
Speaker 4: we manage them that we have fire lanes, so we
Speaker 4: have fire breaks that we need to address that these
Speaker 4: new risks, yes, they manifest in a little bit in
Speaker 4: a different way, but there's a lot of things that
Speaker 4: traditionally have been looked at and I think we need
Speaker 4: to increase the work around that. So insurans have a
Speaker 4: lot of information where they we already see that they're
Speaker 4: guiding that clines specifically, but also governments and municipalities. So
Speaker 4: we're really looking forward to seeing that you're being commissioned
Speaker 4: coming out with something on this later this year. Also
Speaker 4: on resilience, and we're really looking forward to see what
Speaker 4: they're going to instruct member states to do to increase
Speaker 4: their preparedness and resilience, improve their early warning systems, integrate
Speaker 4: systematically climate change data in the way that they plan
Speaker 4: urban areas, the way they plan infrastructure. Those things are
Speaker 4: long term. What is going to make it possible to
Speaker 4: keep people in short because it will be possible at
Speaker 4: an affordable level to obtain an insurance and it's something
Speaker 4: that we also are very dedicated to do. We've worked
Speaker 4: on this for a long time and we will continue
Speaker 4: to work on it for a long time. It's at
Speaker 4: the end of the day, risk is our DNA.
Speaker 5: Yeah. The issue with premiums though, do you think that
Speaker 5: premiums are going to see another phase of significant increases
Speaker 5: because of inflation. There had been a moment where you
Speaker 5: saw premiums across Europe really sort of rise fairly sharply.
Speaker 5: That has seemed to abate it more recently. Do you
Speaker 5: think as a result of the wildfares and this year
Speaker 5: that you're going to see a lot more pressure on premiums.
Speaker 4: I think premiums ultimately will reflect the risks, So I
Speaker 4: think we'll will have to go and see what that risk,
Speaker 4: how that risk is manifested. But indeed, in increasing risk
Speaker 4: will impact or put pressure on pricing, which is also
Speaker 4: why I'm so keen on this prevention effort, because that
Speaker 4: is one of the most fundamental things we can do
Speaker 4: to keep the prices down, because ultimately risk and premium
Speaker 4: need to go hand in hand.
Speaker 1: What about the question of catastrophe bonds, something that's being
Speaker 1: used in the US, for example, where we have seen
Speaker 1: dramatically increased risks of wildfires in places like California. Should
Speaker 1: we expect to see increased use of these instruments in Europe?
Speaker 4: Catastroph your bonds is a really interesting instrument, and I
Speaker 4: think it's a very helpful instrument on a wider scale
Speaker 4: if you look at Europe as such, I don't see
Speaker 4: a lot of uptake on that, and I think one
Speaker 4: of the fundamental things is also because catastrophe bonds are
Speaker 4: used to increase capacity where there's a squeeze on that
Speaker 4: we have ample capacity. There's a lot of capacity it
Speaker 4: can still be rolled out that's not tapped. So for
Speaker 4: that capacity to be created by a catbonn and not
Speaker 4: by the capacity we already have, I would be very doubtful.
Speaker 4: I think the important thing is to make sure that
Speaker 4: the capacity that's available is getting utilized.
Speaker 1: Given the trajectory though of what we're seeing in terms
Speaker 1: of the increase of both wildfires and flooding and superstorms
Speaker 1: and winters as well, and maybe on a trajectory where
Speaker 1: that looks likely.
Speaker 4: Not from where I'm sitting right now. No, everything we
Speaker 4: hear from from the industry is that there's significant capacity
Speaker 4: to absorb. We also don't see well, there's been a
Speaker 4: conversation around a European mechanism to act as a public mechanism,
Speaker 4: to act as as a backstop, so to speak. We
Speaker 4: also don't see an important need because again it presumes
Speaker 4: that there's a capacity issue and there's not. It's rather
Speaker 4: a matter of making sure that the demand side issues
Speaker 4: are addressed.
Speaker 1: Okay, Tanya, thanks so much for joining us in studio
Speaker 1: this morning. That's Teyutaf toy Jensen, his Director General of
Speaker 1: Insurance Europe