January 20, 2015 by Canadian Underwriter
Property and casualty insurers must work toward covering more catastrophes worldwide, or risk marginalizing the industry, one industry leader suggests.
“This is a huge problem for our industry,” Phil Cook, CEO of Omega Insurance Holdings said during a presentation in Toronto on Tuesday.
Last year was benign in terms of insured losses from catastrophes, especially when compared to the 30-year average, he noted.
“Unfortunately – or at least I believe it’s unfortunate – that $34 billion only represents about 20% of the actual economic damage suffered around the world, excluding loss of life,” Cook said.
“We as an industry have not done particularly well in addressing the real exposure around the world.”
Projecting over the next decade, Cook suggested that the industry must ensure it’s not marginalized and effectively replaced by governments.
“The largest insurer in the world still is government,” he said. “Where we have indemnity, governments have relief. Where we have premiums, government have taxes.”
The main difference is that governments can collect their premiums (taxes) after a catastrophic event, he noted.
Echoing a recent report from the Geneva Association, Cook noted that ideal insurance penetration should be 10% of gross domestic product. Currently, the global penetration is at just over 6%.
The underinsurance problem is even more evident in emerging countries, Cook added.