Leading up to last year’s property catastrophe reinsurance renewal season, a commonly-heard phrase was “double-double- half”. This referred to reinsurers doubling the cost of reinsurance, doubling the insurers net self-retentions and halving the amount of capacity they would offer.
This was mainly the result of continued poor results catastrophe treaty reinsurers experienced, plus the impact of Hurricanes Ian and Fiona (US $60bn+ in insured losses1), the economic consequences of supply chain issues and the instability caused by geopolitical events.
This year, the reinsurance marketplace is being described as “orderly”. While this is a drastic difference from last year, reinsurance providers are still pushing for price increases.
How does the global reinsurance market impact commercial businesses in Canada?
For insurers, this means a tighter approach to risk selection, capacity deployment and an even higher price for catastrophe reinsurance protection in 2024. It will also result in higher prices and higher deductibles for risks located in areas exposed to higher hazard flood, wind, earthquake, wildfire and hail events.
1. Understand your risk
- Have a clear view of your exposure to natural hazards (flood, wind, earthquake, wildfire and hail).
- Know the exact location of your property by using geocoded longitude and latitude to help determine it’s hazard level.
2. Predict as best you can
- Try to learn the predicted frequency of a natural hazard that could damage your property, such as the return period for a flood event and take measures to prevent damage.
3. Prepare for loss or damage
- Incorporate the impacts of climate change into your business planning.
4. Be ready to mitigate any loss
- Strengthen the resilience of your property to withstand a catastrophic event and ensure you have a robust disaster recovery plan.
Always provide your insurer with as much information about your property as possible. Most insurers use software modelling to generate the financial impacts of natural catastrophic events on properties. Providing better quality risk information to an insurer will enhance the probability of better pricing and support stable underwriting of your risk.
It’s important to understand your policy coverage and ensure your insured Property and Business Interruption values adequately reflect your exposure and policy coverage. These values should be reviewed and updated annually.
Finally, if you haven’t already done so, plan for the impact of climate change and understand your risk in 2030, 2040 and 2050.
For more information: Canadian Insured Losses from Catastrophic Events Exceed CAN $3 Billion in 2023 - CatIQ
Looking for risk management solutions for your business?
Aviva’s Global Corporate & Specialty team is here to answer questions and offer advice. Reach out to us at gcs.ca@aviva.com
1 Climate change and La Niña driving losses: the natural disaster figures for 2022 | Munich Re
