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Rolf Hueppi, chief executive of Zurich Financial Services, told insurers at a recent gathering in New York that the events of Sept. 11 have redefined risk.
According to a Reuters report, some insurers will fall under the $70 billion or so in claims stemming from the industry’s most costly disaster. Others, however, are pushing through rate increases, and preparing for a profitable year.
Well-capitalized property insurers like American International Group Inc. that can pay their claim bills are getting prepared for major premium hikes.
Things look less rosey for smaller reinsurers with concentrations of aviation and catastrophe risk, because they may terminate under the strain of claims or find themselves too weak to re-enter the market. Car and home insurers, like Allstate Corp., although stinging from large losses after Tropical Storm Allison, may miss out on price increases, which are mainly left to the commercial sector.
As new year renewals approach, property and casualty insurers are making the most aggressive moves, giving customers rate hikes across the board and making every effort to move the burden of terrorism insurance onto government.
Price increases also are taking place in a range of other policies, from workers’ compensation to liability.
These price hikes, however, may not be enough to bring back profits immediately after 10 years of competitive rate cuts.
The losers will be smaller firms that find themselves with a claim bill too big to digest, or not enough capital to go back into the market and make the most of price increases.
Already this year, European reinsurer Copenhagen Re shut its doors to new business, and Japanese insurer Taisei Fire and Marine crumbled under the weight of Sept. 11 claims from an aviation underwriting pool in the United States.
More will follow, analysts say, as the complicated web of reinsurance coverage plays out over the next year or so.