Risks shift from states to private market
Due to financial pressures, countries
worldwide are seeking to transfer risks
to the private sector, Moses Ojeisekhoba,
Swiss Re’s CEO of reinsurance, said at the
company’s press conference at the 2017 Rendez-
Vous in Monte Carlo.
“People in mature and developing countries
still rely on a positive optimism that states will
rescue them,” Ojeisekhoba said.
Such an attitude can be exemplified through
the protection gap worldwide in relation to
earthquake or flood risk.
“What we see on a global scale is that countries
and municipalities are all challenged from a
financial standpoint. You see them actively trying
to shift risk from the public sector to the private
sector and that relates to natural hazard cover or
health or pensions,” Ojeisekhoba said.
This trend is unlikely to abate any time soon,
especially since the exposure will continue to
grow, he said.
“The hazard is clearly there. It’s a problem
that gives people a false sense of security.”
Ojeisekhoba believes that the trend of
shifting risk from the public to the private sector
will make people take these risks more seriously.
“The private market can offer substantial
capacity for many of these risks,” said Swiss Re
CEO Christian Mumenthaler. In addition, the
insurance industry can help mitigate these risks
which could reduce premiums and therefore
costs for the population. Risks are expected
to continue growing, for example due to
urbanisation and an aging population.
While the capacity to cover significant parts
of the risks may be available in the private
re/insurance market, the sector is facing a
number of challenges, Ojeisekhoba admitted.
Profitability in the P&C reinsurance sector
is deteriorating, in terms of both return on
equity and underwriting profits. And there
are additional challenges such as climate
change, protectionism and nationalism in some
countries and regions, Ojeisekhoba said.
Instead of focusing on prices, which
continue to be under pressure in the current
soft market, Swiss Re wants to focus on
knowledge to create solutions to add value to
clients’ business, ultimately improve profits and
enhance growth of the sector. n
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