Swiss Re’s da Victoria Lobo: SRCC risks increasingly front of mind for reinsurers

Reinsurers are increasingly concerned about losses from strikes, riots and civil commotion (SRCC) after a surge in political unrest this year, according to Swiss Re’s head of P&C reinsurance for western and southern Europe, Nikhil da Victoria Lobo.

Ahead of the Rendez-Vous de Septembre in Monte Carlo, The Insurer TV sat down with da Victoria Lobo at Swiss Re’s headquarters in Zurich to discuss the key talking points for the conference.

SRCC has made headlines across the world, including the recent riots in France.

“When I think about Chile in 2019, that was a property loss of $3bn-$4bn from strikes, riots and civil commotion; and South Africa, a few years ago, where it was about a $2bn-$3bn insurance loss. France this year – a €650mn loss – and there’s also the losses from the [Black Lives Matter] protests in the US,” da Victoria Lobo highlighted.

“We're obviously looking at a situation where concern in society around democratic political institutions is manifesting itself in society's unease and in our insurance sector,” he added.

Property treaty coverage for SRCC losses has tightened up notably in the past year, but remains available. However, multiple restrictions that should limit loss transfer have been implemented; for example, changes to hours clauses and, of course, rates.

“I think what the industry must do is focus on what are the areas we can provide our intellectual thought to it,” he said.

“So, that’s around aggregation and attachment points. And it’s also around making sure that we properly price for this, because again, the point is, we need to be able to respond when our insurance clients have coverage issues and face these coverage losses.”

However, with rates nudging up across several critical classes of business, comprehensive cover is becoming harder to obtain from an affordability standpoint.

“Look, the affordability topic is always a hard one,” said da Victoria Lobo.

“I think the critical function of reinsurers is to independently look at what are the risks emerging, properly price for those risks, then as we plan over the coming months, have a dialogue with our clients around the coverage, the exposure and the relative price to it. We need to make sure that we keep this industry sustainable and responsive,” he said.

“Secondary” no longer relevant peril term

Da Victoria Lobo predicts that discussions in Monte Carlo among clients and brokers will “see a continuation of the focus on loss occurrence language, and on topics such as attachment points and removing frequency, as well as pricing”.

Speaking about “so-called” secondary perils – which have spurred changes in attachment points among reinsurers, meaning insurers are having to take on bigger retentions and more loss exposure – da Victoria Lobo was keen to place losses from these events in context.

“We’re talking about $50bn of catastrophe activity in the first half of the year, and 70 percent of that comes from US convective storms,” he said.

“This is notwithstanding the floods that are ongoing right now in parts of Eastern Europe. In this context, these events have moved from being a secondary to very much a primary discussion point.”

As frequency and severity of natural catastrophes continues to increase, the relationship between private companies and the public sector will be crucial to overcoming gaps in coverage.

Da Victoria Lobo has spent much of his career working closely with governments, and describes the partnerships between the private and public sectors as a topic “close to his heart”.

"The public sector is often driven by crises, but it also has a long-term vision and the industry needs to be a little persistent on the topic,” he explained.

“If you look at what's happened in Italy, with the floods, it’s the eighth-largest economy in the world, and there’s probably a $10bn economic loss of which $600mn is insured. So, this is not only an emerging market story.”

Watch the 12-minute video interview with Swiss Re’s Nikhil da Victoria Lobo to hear this thoughts on how:

  • Strikes, riots and civil commotion is, and should be, a priority for reinsurance firms. The industry must place more focus on it so it is ready to respond when clients have coverage issues
  • Natural catastrophes have moved from a secondary to a primary discussion point this year
  • The situations in Italy and Turkey have emphasised the importance of the relationship between the public and private sectors