Rapidly changing nat cat, political violence and casualty re/insurance situations mean point to a greater need for collaborative innovation, reinsurance broker Howden Re said.
Howden Re has released a report called “Beyond the horizon: shaping the future of risk” on shifting exposures and the need for industry innovation.
The reinsurance broker’s report emphasises a need for collaboration and innovation to address the evolving risk landscape and drive the next phase of re/insurance industry growth.
Howden Re noted an imperative for industry collaboration in developing innovative solutions in response to rapidly changing natural catastrophe, political violence and casualty re/insurance landscapes.
As the sector faces unprecedented challenges globally, the report outlined strategic approaches described as critical in navigating the next phase of the industry’s cycle.
“The landscape of risk is changing at an unprecedented pace, and so too must our industry evolve alongside it,” said Massimo Reina (pictured), CEO, international, of Howden Re.
“At Howden Re, we are committed to championing the development of innovative solutions and believe that collaboration across the industry is essential,” he said.
“We are dedicated to bringing together the best minds from brokers, reinsurers and capital providers to ensure that we are all prepared for the future and delivering the risk resilience so needed in today’s world,” Reina added.
Three themes
The report highlighted three core areas reshaping the re/insurance industry and requiring immediate attention:
The first of these was dubbed “When it rains, it pours”, referring to rising natural catastrophe losses in Europe.
Howden Re noted recent European flood events and severe hailstorms in Italy have significantly impacted insured losses, driven by shifting climate patterns and increasing exposure in vulnerable regions.
For example, the 2024 floods in Bavaria and the unprecedented hailstorms in the Po Valley in 2023 underscore the need for the re/insurance sector to develop tailored products and solutions that address both ‘peak’ and ‘non-peak’ perils.
The report proposed specific strategies to mitigate these risks, including enhanced flood protection infrastructure and exposure management tools to prevent hail damage.
The second theme was “A world of trouble”, referring to emerging geopolitical risks. Beyond natural disaster perils, the report highlighted a broader array of risks, including the rise in strikes, riots and civil commotion (SRCC) and political violence (PV) events.
“These threats are becoming more frequent and severe, and though a global issue, the risks are particularly heightened in regions with increased political instability. The report examines recent incidents in markets such as South Africa and New Caledonia, proposing advanced modelling techniques and innovative risk transfer solutions to manage these complex exposures,” Howden Re said.
Casualty concerns were the third theme. The report addressed challenges in casualty lines, particularly in relation to growing liabilities associated with persistent pollutants such as per- and polyfluoroalkyl substances (PFAs), as well as evolving risks in the motor market driven by the adoption of autonomous vehicles.
These emerging issues require the industry to rethink traditional reserving strategies, the broker said, and to adopt more granular approaches to manage long-tail liabilities.
“The risks we are encountering today are more interconnected and severe than ever before, requiring new ways of approaching risk management,” said David Flandro, head of industry analysis and strategic advisory, Howden Re.
“Bespoke solutions are needed, tailored to the unique challenges faced by different regions and lines of business worldwide,” Flandro said.
Collaboration focus
The report offered a forward-looking perspective on the industry’s trajectory, suggesting the future re/insurance market will have more emphasis on resilience, adaptability, and innovation.
The ability to anticipate and respond to evolving threats will be critical in sustaining market stability and growth, Howden Re emphasised.
The report also provided proposals for new solutions tailored to specific risks, such as enhanced reinsurance structures for European flood and hail events, innovation in parametric products to counter SRCC and PV exposures, and advanced liability management strategies in the casualty sector.
These recommendations are designed to help the industry navigate the complexities of today’s risk environment, while positioning it for future success as the next phase of the reinsurance cycle begins, the broker offered.
Reina concluded: “At Howden Re, we believe that the future of risk management lies in our ability to innovate and collaborate. We are dedicated to working with our partners to ensure that the (re)insurance industry not only survives but thrives in this new era.”
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