Business Times, 8th January 2008
By Jeeva Arulampalam
Catastrophe coverage will be expensive and scarce in future as climate change gives rise to more catastrophes, says a top official with a local reinsurer.
This combination will result in very few specialists and sizeable reinsurers providing such coverage for catastrophe exposure.
"The smaller-sized reinsurers could be putting their solvency margin position at risk if they continue to underwrite such exposures given that global warming and other related concerns will lead to more catastrophes," Malaysian Reinsurance Bhd senior vice president and chief financial officer Norazman Hashim said in an interview with Business Times.
Natural catastrophes usually escalate the prices of insurance and reinsurance policies, more so for catastrophe-prone countries.
"Although Malaysia is not a catastrophe-prone country, we will still be affected as reinsurers tend to review their costs on an overall basis by increasing and spreading their (recovery) costs worldwide," said Norazman.
While natural disasters like Hurricane Katrina in the US definitely affect the domestic industry, local reinsurers usually rate local risks based on local loss experiences.
"Thus, a national reinsurer can provide very competitive pricing on reinsurance costs to local insurance companies compared to international reinsurers," he said.