Higher rates sends ‘stark signal’ to policymakers

Insurance and reinsurance price hikes send a “stark signal” to policymakers to discourage construction in areas at risk from natural catastrophes, Hiscox’s chief executive has stated. 

“Ultimately what you are trying to do through pricing is signal a change in behaviour,” said Aki Hussain,  who has led the Bermuda-based re/insurer since 2022. 

He told the Financial Times: “If you’re going to build on flood plains, it might well be problematic to get flood insurance.” 

He said insurers and reinsurers were “absolutely there” to mutualise risk across communities but only if there was some management of the risks. 

“The only way we can really signal that — we can lobby, we can have conversations — but the most stark signal is ultimately through pricing.”  

Insurance executives have been increasingly vocal in calling for rule changes that deter building on floodplains and in areas susceptible to wildfires, or at least strengthen building codes, The FT said. 

In the US, executives have pushed for other changes such as legal reform to restrain spiralling claims costs. Recent such reforms in Florida have supported reinsurance supply, according to analysts. 

“We do believe it’s an insurable and reinsurable risk but it’s evolving. Climate change is having a definitive impact in a number of different ways,” Hussain added, such as wind storms tending to be wetter and move more slowly. 

Once a hurricane has “made landfall, the damage that is flood-driven seems to be increasing”. 

Hiscox increased its catastrophe reinsurance capacity in 2023 and 2024. The FT said the company benefited from its composite model, choosing where in the insurance chain to take on risk. In the first half that was particularly on the reinsurance side, he said, as well as retrocession, which is risk-sharing with other reinsurers.

Hiscox earned $283.5 million before tax in the first half of 2024, up from $264.8 million in 2023. Its insurance service result rose from $221.4 million to $240.7 million.  

Hiscox Re & ILS, which operates from Bermuda, had a first half pre-tax profit of $86.5 million compared to $55.1 million in 2023. Its insurance service result rose from $32.7 million to $43.5 million. 

Its combined ratio improved from 76.3% to 73.8%. 

It said rate had been flat for the first half of the year. 

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