Extreme weather incidents to impact European insurance costs
07/11/2023
The cost of insurance cover in Europe is set to rise as a result of extreme weather events, including Storm Babet which last month caused damage estimated at between Euros 520m (£450m) to Euros 751m (£650m) in the United Kingdom.
Storm Babet affected large parts of Northern and Western Europe including, Sweden, Denmark, Norway, the UK and Germany and is the latest weather incident to impact the insurance market.
Across Denmark, more than 1,000 insurance claims and damage reports were filed in relation to damage caused by Storm Babet.
The Natural Damage Council in Demark has approximately DKK 1.1 billion to cover claims, said Poul Jensen, chief consultant at the Natural Damage Council. Government officials have since confirmed that extra funds will be made available if necessary.
John Neal, the chief executive of Lloyd’s of London, is warning that rising costs are likely to impact the market following the heatwaves, wildfires, storms and flooding which affected thousands of people in Europe. He said: “I think you’re going to see a much stronger movement in price for European reinsurance business.
“When we look at weather-related losses, the reality is it’s changing and we’ve got to be much smarter in the way in which we assume and measure risk.
“The pattern of weather, which is a function of climate change, is changing. I don’t think you can simply rely on past data and say, ‘that’s what happened in the past so that’s what will happen in the future.’ I think there’s a lot more on us to understand what changing weather patterns mean.”
In the US prices for insurance cover have risen sharply over the past year to cover growing weather risks while the European market has been more subdued. Neal said prices for US reinsurance have risen by between 20 per cent and 40 per cent over the past year, while prices in Japan have also increased sharply, however, in Europe, prices have risen by just 10-12 per cent.
The European Insurance and Occupational Pensions Authority (EIOPA) has previously warned insurers they must strike a balance in preparing for the increased frequency of natural catastrophe claims, while also ensuring financial protection remains affordable for policyholders.
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