Natural disasters: insurance increasingly crucial

The frequency of natural disasters increases and with it the damage count. One of the main risks companies are exposed to is business continuity. It becomes essential to continuously ensure the availability of all the key resources necessary for the execution of the activities crucial for the company.

The Topic Of This Post

1 BUSINESS CONTINUITY – STRATEGIES AND PROCESSES TO SAFEGUARD COMPANY VALUE

2 Fitch Ratings: claims from natural disasters on the rise

3 Natural disasters: it will be 2022 with growing premiums

4 Damage from natural disasters: insurance is essential

5 Damages from natural disasters: ANIA proposes the insurance obligation

2021 will be one of the most difficult five years for reinsurers, due to the increase in claims from natural disasters. This was supported by Fitch Ratings, which estimates that the insured damages will exceed 40 billion dollars globally, due to floods, hurricanes, and minor catastrophic events, such as the fires that ravaged the summer months. In this scenario, insuring becomes one of the central actions for risk management and mitigation.

BUSINESS CONTINUITY – STRATEGIES AND PROCESSES TO SAFEGUARD COMPANY VALUE

The Business Continuity Management process includes resources and specific organization, as well as the development of corporate risk management strategies, plans, and actions capable of providing valid operational alternatives for carrying out those activities whose interruption could seriously damage the entire organization.

Fitch Ratings: claims from natural disasters on the rise

One of the most evident effects of climate change is undoubtedly the increase in natural disasters, both in terms of frequency and intensity, with serious consequences also from an economic point of view.

This is the scenario described by Fitch Ratings which in this sense predicts that 2021 will close as one of the five most expensive years for global reinsurers, due to the increase in claims from catastrophic events.

In detail, the year that is about to end was marred by severe floods in central Europe in July and by Hurricane Ida in the United States in late August and early September, but not only. Throughout the summer of 2021, serious fires have occurred in the northern hemisphere, which could recur during the winter in the southern hemisphere.

If we consider that around 40 billion dollars had already been insured in the first half of 2021 alone, the year will certainly close for reinsurers with a much higher figure, thus going beyond forecasts.

Natural disasters: it will be 2022 with growing premiums

And the trend will continue also in 2022. To say the same Fitch that, for the premiums in the property segment for the coverage of disasters, expects double-digit increases in the growth rate. This is a further consequence of a truly complex 2021 which for reinsurers is at the same time:

  • the certainty of an increase in the frequency and intensity of natural disasters ;
  • losses that go beyond estimates, as we have seen.

All this will lead to an increase in prices, confirming a trend with the plus sign as in the last five years.

However, according to Fitch, rising prices show a certain adaptation of the sector to climate change, therefore the awareness that the risk must be adequately financed and that the price, in this case, cannot be a lever to gain market share, while it is necessary to act. on policyholders’ awareness of risk-sharing.

Damage from natural disasters: insurance is essential

Despite the objective risks exposed worldwide and nationally, insurance coverage for damages deriving from catastrophic events in Italy is at its lowest compared to the rest of Europe.

According to a survey prepared by the National Association of Risk Managers and Corporate Insurance Managers (ANRA) in collaboration with the Universities of Milan, Parma, and Florence, our country on this front only records 3.2% of insured losses, 2, 4% in the case of private homes (the latter is an IVASS estimate). A decidedly low level of protection compared to the risks identified.

And if 40% of companies have never purchased any type of coverage for environmental and catastrophic risks, 22% of production activities declare that they have suffered damage from accidents of this type, with a direct loss between 5 and 10 million euros. (17%) or higher than 50 million euros (10.4%).

ANRA research always provides a partial explanation for this lack of coverage: about 62% of companies are aware of the need to insure, but in most cases they show a skill deficit, insuring themselves with multi-risk policies.

This is where insurance services and business risk assessment consultancy come into play, allowing you to take control of all potential vulnerabilities, including those related to environmental disasters.

Damage from natural disasters: ANIA proposes the insurance obligation

Despite the objective risks exposed so far and the certainty that these will only increase in the years to come, ANIA is asking that an insurance policy against disasters become mandatory. This would be an imposition by law that would fill the very serious gap in coverage concerning damage from environmental catastrophe.

Maria Bianca Farina, president of ANIA, during the work of the last Insurance Summit, said:

“One of our priorities is to align legislation with that of most of the other European countries, finally equipping ourselves with a compulsory public-private bonds insurance scheme. against natural disasters, which stimulates the sustainable protection of our citizens and ensures the homogeneity of guarantees. “

The President stated that the insurance system must contribute concretely and effectively to the fight against climate change and that partnerships between public and private represent the ideal scheme for reaching the best solutions. Considering the urgency of “reversing the trend and ensuring a more peaceful tomorrow for the new generations”.