Rising costs threaten the insurance industry: price increases and accumulation risks in focus.

Rising costs threaten the insurance industry: price increases and accumulation risks in focus.

According to a report by T-Online.de, price increases are expected in the insurance industry due to increased costs. The world's largest reinsurer Munich Re plans to take inflation into account as a key factor in price negotiations with primary insurers. Natural disasters are another price driver. According to an estimate by the General Association of the German Insurance Industry, companies' expenses for car repairs and other damage in motor vehicle insurance will be around 2.5 billion euros higher than their income this year.

The increased costs and natural disasters impact the market, the consumer and the insurance industry. The price increases will impact insurance premiums, meaning higher costs for consumers. Expenses will increase, particularly in motor vehicle insurance, which in turn will lead to higher premiums for policyholders.

The increased losses from natural disasters show a clear trend towards increasing losses from weather-related events on a global scale. This affects not only the number of natural disasters, but also their severity. In addition, damage increases not only from major natural hazards such as hurricanes, but also from secondary hazards such as thunderstorms, floods and forest fires. This development is expected to continue to intensify.

Another factor that can lead to expensive damage is political and economic discontent, such as strikes, riots and civil unrest. These events have recently increased in frequency and can affect large regions. This represents a cumulative risk in which damage affects many customers at the same time and can therefore be very expensive.

A concrete example of accumulation risk is a major cyberattack that brings companies to a standstill. Since the wave of hacker attacks does not subside, Munich Re expects further growth in the cyber insurance business. The European cyber market is expected to reach around $8 billion by 2027.

Overall, it is expected that increased costs and natural disasters will lead to higher insurance premiums. Customers will feel the impact in the form of rising costs. The insurance industry must prepare for the increasing losses and adapt its insurance conditions. Nevertheless, certain risks such as the failure of critical infrastructure or cyber war remain uninsurable.
Source: According to a report by www.t-online.de