Lhe year 2022 will be a pivotal year for the world of insurance and reinsurance. Three major events have permanently upset the balance in our sector. In order of appearance, the war in Ukraine will be mentioned first. This high-intensity conflict, unprecedented in Europe since the end of the Second World War, upsets European geopolitics and bruises the Ukrainian civilians with whom we stand in solidarity, as they today carry the values of freedom and democracy dear to the Europe.
Even if, with regard to the human drama, everything may seem minor, this war also has an impact on the world of (re)insurance: directly through its consequences on people and property, for example the aircraft confiscated by the Russians . But also indirectly with the rise in energy prices, and in particular gas, which accelerated the inflationary trend already present in Europe at the end of the Covid-19 pandemic.
This is the second major event of the year: the world of low rates is over. And for insurance, this is a major change. Because of inflation, central banks have changed their doctrine: they no longer absorb the supply of sovereign bonds to artificially maintain a universe of low interest rates; massive monetary easing policies [quantitative easing]It’s finish.
The cost of risks and claims
Rates are rising, inflation too and therefore, in the short term, the cost of risks and claims is increasing. It is also the opposite of better returns for the investments of the assets that we manage in the medium term. It is also a social risk factor, if inflation lasts and if wages do not increase fast enough. Finally, there are more risks to public finances if the most fragile states in the euro zone do not support the rise in rates.
Third change: 2022 demonstrated that the increase in the economic and insurance cost of climate change was not temporary. For the second year in a row, insured losses linked to natural disasters exceeded 100 billion dollars (around 92.25 billion euros), against a ten-year average of 72 billion. The mismatch between premiums and observed risks has, in fact, never been so strong.
In this context, the world of (re)insurance will not stand still. Of course, rates will have to adjust to this new environment. But we must go further and collectively invest in prevention, train our customers in the challenges posed by the paradigm shift we have entered, and innovate by developing new tools. A single example: parametric insurance, which makes it possible to provide an insured with the guarantee that he will receive a certain sum of money, the amount of which is fixed in advance according to the crossing of certain thresholds determined in the insurance policy. insurance.
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