Storm warning for businesses
Apparently 2010 recorded the second highest number of natural catastrophes since 1980. A statement this week from insurance company Munich RE said there was a total of 950 natural catastrophes last year, nine-tenths of which were weather-related such as storms and floods.
As a result, overall losses amounted to around $130 billion (£83 billion), of which only approximately $37 billion (£24 billion) was insured. This, Munich RE said, puts 2010 among the six most loss-intensive years for the insurance industry since 1980.
Torsten Jeworrek, Reinsurance CEO of Munich RE, said 2010 showed the major risks we all have to cope with. “There were a number of severe earthquakes. The hurricane season was also eventful – it was just fortunate that the tracks of most of the storms remained over the open sea. Things could have turned out very differently.
“The severe earthquakes and the hurricane season with so many storms demonstrate once again that there must be no slackening of our efforts to analyse these risks in detail and provide the necessary insurance covers at adequate prices. These prices calculated by the insurance industry make it possible to assess the economic consequences of these otherwise difficult-to-evaluate risks.”
The company said the high number of weather-related natural catastrophes and record temperatures provide further indications of advancing climate change.
With the industry warning risks are likely to continue and potentially increase, so too will risks to business continuity. Supply chain, logistics and manufacturing bases all need to be looked at with this – and the likely increase in insurance costs – in mind in 2011.
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Natural catastrophies have been pretty good excuses of price variations even if on contract. Buyers are obliged to accept them.
I guess the nice thing about being in the insurance business is you can just push your prices up when the going gets tough; not necessarily remembering to bring them down when things get easier. For those of us with very small businesses, a sprinkling of snow here, a small increase in VAT there, can make a substantial difference to organisational financial performance.
Insurance companies love a good disaster. Its always an excuse to hike prices and add to those profits. Unfortunately, its not just insurance companies that are using this opportune excuse to increase revenue.
There is a degree of sympathy for price rises when a sector is clearly impacted by factors outside of their control but that sympathy starts to evaporate when (1) you wonder whether that sector is really that competitive between providers and (2) there never seem to be price corrections downwards once economic conditions return to historical norms.