Rate hikes will continue not just this year but into 2021, according to industry thought leader Michael Chang.
Chang, CEO of Sompo Global Risk Solutions, spoke about pricing increases during his keynote at the Vermont Captive Insurance Association (VCIA) virtual conference.
The CEO told conference delegates that the pricing increases were a result of both external factors and the approach from underwriters.
“I believe rate hikes will continue for the remainder of this year and into 2021,” Chang told the conference.
“And I think what that you’re seeing is a disciplined approach by the underwriting community, to make sure that the capital they put out on any individual risk is capital that can meet the return hurdles that they’re looking for.”
Chang outlined the four lines that were pushing the hard market: property, umbrella/XS, auto and public company D&O.
He also focused on the external factors that are contributing to pricing, focusing on natural disasters and the property market.
“We’ve had 820 natural catastrophes causing overall losses of $150bn [this year],” he explained. “When you compare that with 2018, which is $52bn, you can see the significant amount of activity that has happened in that period of time.
“You’re seeing flood losses, you’re seeing hurricanes, you’re seeing tornados, you’re seeing hailstorms and wild fires really drive a lot of what is going on in the property marketplace.”
Chang also had strong words about the impact of climate change, and how the insurance industry can mitigate it.
“Wherever you sit on climate change, regardless of your political view, climate change has become a bigger issue,” he said.
“It’s frustrating because climate continues to evolve and continues to change. And the advance that we’re having now are hitting more populated areas.”
As opposed to VCIA’s day one keynote Dr Robert Hartwig, who said that he believed that climate change was out of the hands of the insurance industry, Chang
“These challenges are not easy to forecast. And when they happen I always feel like the industry is catching up. So what can we do?” he asked.
“I think we can be more preventive through risk control, working with our clients to build more mitigation techniques, to minimise the impact of these events.”
In relation to the property market, Chang said he believed that the industry could be more proactive for better results long term.
“I think the other thing we can do is look at a lot of the building codes based on being proactive in certain areas,” he explained. “Do we build out buildings differently to different standards? That could ward of some of these events before they happen.
“It may cost more in terms of what you have to spend upfront to build and to reposition assets to make them strong and fortified but it’s all with the intent of minimising damage and protecting lives.”