The recent disasters around the region, including the floods in Thailand, the tsunami in Japan and the earthquakes in New Zealand, will cause higher insurance prices, according to David Carter, the chief executive of Infinity Insurance.
“This market is about to undergo a major change,” says Carter, who attended the 11th Singapore International Re-insurance Conference (SIRC 2011) in Singapore at the beginning of this month.
Carter says the Japanese tsunami cost $26 billion and the New Zealand earthquakes cost $30 billion. The Thai floods have cost $19.5 billion so far, and that figure is likely to increase.
“I reckon that will go to $30 billion,” Carter says.
While at the conference, Carter and his colleagues from Cambodia faced questions from global re-insurers who wondered what was different between Thailand and Cambodia.
“They asked why they shouldn’t treat Cambodia the same way Thailand is treated,” Carter says. Cambodia does not have the same level of industry as Thailand, but suffers from some of the same perils, including flooding.
“We expect effects to be felt in the next six months,” Carter says. “We cannot escape the fact that Thailand is our neighbour. We can, however, manage these effects by careful risk selection.”
Carter says insurance companies are, in turn, insured by re-insurance companies.
“You’ve got to look at who is behind the insurance companies when the claims go in. Sometimes large, catastrophic losses can lead to insurance-company collapses if those companies have not adequately managed their own risk.
"This happened in New Zealand after the Christchurch earthquakes. You’ve got to look at the complexion of re-insurers and see if they are better than their competitors. If you do that, you can assess how fast you can get your claim back.”
Carter also says customers who can demonstrate stronger risk-management practices are going to get a better result from the insurance marketplace.
Treating one country, or insurance company, the same as another is folly, according to Carter.
“Every single insurance company is different, and the amount of coverage you give is different for each client. As an insurer, if you get it right, you’re OK; if you don’t, it can be lethal,” he says.
Carter expects some insurance companies will become insolvent because of the Thai floods, which he describes as Thailand’s “World Trade Centre” event. He says his own company, Infinity, has strong reinsurers backing it up.
“Our criterion is nothing less than the best,” he says. “As a customer, you have to ask your insurer: 'Who is behind you?'
"If you insure, you'd better be sure that your company is adequately re-insured. Disregard this at your own peril."
“At Infinity, we are delivering a better level of service to the customer and, when the claim comes, we are paying quickly and delivering on our promises,” Carter says.
“Cambodia cannot be insulated from the world, so we will feel the winds of change from these recent losses soon. Clients should make sure they are properly prepared for all eventualities.”