Global disasters contribute to rising costs
Non-life insurance premiums in the Philippines may increase as global reinsurance costs rise, driven by climate change and natural disasters, according to industry leaders.
In a recent press briefing covered by Business Mirror, the Philippine Insurers and Reinsurers Association (PIRA) warned that catastrophic events, such as the California wildfires, are raising reinsurance costs.
Eden R. Tesoro, PIRA’s former chairperson and the chief operating officer of Malayan Insurance, explained that insurers relying on affected reinsurers are likely to face increased pricing.
“If your reinsurer is one of those affected by those fires, then you can expect that they will adjust their pricing,” Tesoro said.
Reinsurance allows insurance companies to manage large-scale risks by transferring part of their exposure to other insurers. When reinsurance costs rise, those increases are typically passed on to insurers and eventually to policyholders.
According to Tesoro, the rising cost of reinsurance is putting pressure on insurers, with expenses ranging from 50% of total costs to nearly double in some cases.
She told Business Mirror that this financial strain has already led to a 10% to 15% increase in non-life insurance premiums in 2023 and 2024.
Despite these rising expenses, insurers cannot unilaterally raise premiums. PIRA executive director Michael F. Rellosa emphasized that any premium adjustments require regulatory approval, limiting insurers' ability to respond quickly to increased costs.
Jose Augurio N. De Vera Jr., head of the non-life reinsurance division at the National Reinsurance Corporation (NatRe), described the current reinsurance market as a "hard market"—a term used when coverage becomes both more expensive and harder to secure.
De Vera said the California wildfires are just one example of global disasters contributing to rising costs. Each significant event adds financial pressure on reinsurers, which affects the pricing of insurance coverage worldwide.
The Philippines’ vulnerability to natural disasters intensifies the issue. According to the World Risk Index, which Business Mirror also cited, the country ranks first in the world for disaster risk exposure.
Rellosa warned that the Philippines could face record-high temperatures and increased rainfall, raising concerns about future losses.
"It looks like there’s a perfect storm brewing, and we want to be ready for that," he said.
Global political and economic conditions add another layer of complexity. Tesoro highlighted concerns over trade tensions, particularly those involving the United States. Rising tariffs may increase import costs and drive up local production expenses, which could further affect insurance pricing.
As reinsurance costs continue to climb and global risks evolve, how will these factors affect the affordability and availability of non-life insurance for consumers? Share your thoughts below.
Source: insurancebusinessmag.com
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