Inflation can make claims more expensive: raise rates now
Swiss Re’s Americas division head Pierre Ozendo has warned that “rampant” inflation could erode reserves if rates for coverage fail to keep up, Bloomberg reports.
“Inflation is a destroyer of reserve adequacy and destroys economic value in a business that measures its economic success over multiple years,” Ozendo, said. “There is a very real fear of inflation ramping up.”
Ozendo said casualty rates dropped over the last two years and property reinsurance prices increased gradually in 2009. If inflation “is not contained and becomes rampant, then it will become a real problem,” Ozendo said.
Rate rises needed
He said reinsurers need to gradually raise rates to counter the effects of consumer price increases.
“The danger is real,” Bob Hartwig, president of the Insurance Information Institute, said. “The rates you put out on the street anticipated a certain amount of increase in frequency and severity and they end up higher than what you anticipated.”
