Non-life insurance costs rising on high reinsurance

The costs of insuring personal assets against accidental losses could rise due to the increased reinsurance costs as climate change intensifies, according to the umbrella organization of non-life insurers.

In a press briefing on Wednesday, Philippine Insurance and Reinsurers Association (PIRA) former chairperson Eden R. Tesoro said that the wildfires in California could add up to the costs of non-life insurance premiums.

“If your reinsurer is one of those affected by those fires, then you can expect that they will adjust their pricing,” Tesoro said, who also serves as the chief operating officer of Malayan Insurance.

A reinsurer is an insurance company providing financial protection to other insurance companies. Tesoro said that for reinsurers to stay afloat, they will push back the pricing to companies that they reinsure.

This would then translate to higher premiums charged to policyholders as it is not sustainable for insurers to price at the same level as the cost of reinsurance is already “very high,” Tesoro said.

However, Tesoro said reinsurance sources of non-life insurers vary, with the National Reinsurance Corporation (NatRe) as the only domestic professional reinsurance company in the Philippines.

“As a rule, when you have this significant rise in reinsurance costs, then generally, the product will have to increase in price,” Tesoro added.

This was observed in 2023 and 2024, when there was an increase of about 10 to 15 percent in non-life insurance premiums, according to Tesoro.

Non-life insurers, however, cannot just increase premiums as these need to be approved by the regulator, PIRA Executive Director Michael F. Rellosa said.

NatRe’s Head of Non-Life Reinsurance Division Jose Augurio N. De Vera Jr. said reinsurance costs significantly increased in 2024, as a “hard market” has resulted in increases in reinsurance.

The California wildfire, De Vera said, was an accumulation of all the disasters that happened elsewhere. “[It] is just one factor that might increase the overall prices.”

Tesoro said reinsurance costs could be anywhere from 50 percent to nearly double. “Even if you could afford it, which many companies struggle with, it wasn’t always available.”

PHL riskiest

With various natural catastrophes occurring all over the world, the Philippines stands as the most vulnerable, ranking first in the World Risk Index.

“We’re gonna be hitting record temperatures and we haven’t even started our summer. If there’s record-high heat, it usually translates to record-high rainfall,” Rellosa said.

“It looks like there’s a perfect storm brewing and we wanted to be ready for that,” Rellosa added.

Moreover, while United States politics may not directly hit non-life insurers in the Philippines, it could impact their investments, according to Tesoro.

“The politics, not only America’s but the whole world, there seems to be a full-blown trade war happening already, tit for tat,” Rellosa said, adding that geopolitics is a “big issue.”

As the US imposes tariffs, the companies and countries that are affected will also impose counter-tariffs that will affect trade.

“Anything that affects the economy, we feel that in the insurance industry, either we insure less goods or the cost for example of preparing stuff locally would be more expensive because we import. So an increase in tariffs should also increase in prices,” Rellosa said.

Source: businessmirror.com.ph