During this past (Re)Connect conference, Eduardo Pérez de Lema, CEO of MAPFRE RE, had a fireside chat with Rachel Dalton, senior reporter at Insurance Insider. The conversation covered topics such as views on and lessons learned regarding the growing severity and frequency of natural disasters, the company’s adaptation to Covid-19, Hurricane Ida’s impact, price adequacy in the different markets, and cyber risk coverage evolution.
On MAPFRE RE’s thinking about climate change and action to protect its portfolio and policyholders over the next decade, Pérez de Lema stated: “The reality is that for many years now, we have shown our strength in absorbing this volatility and this underscores the serious sense of responsibility we carry toward society, but it’s a shame that we still have such a large protection gap, with very significant uninsured losses generated by NAT-cat events, in particular in regions where it would be desperately needed”.
In that regard he believes “we have a number of responsibilities, to a large extent focused on closing protection gaps” by identifying, measuring and modelling risks properly; making insurance coverage more affordable, and by expanding the boundaries of the coverage provided so that protection against risks that are today uninsurable, or in places where the coverage is not affordable, are provided.
Nat-cat losses are on the rise, firstly because the severity of losses is increasing, and because secondary perils are also driving up the total cat bill. For MAPFRE RE’s CEO “this rise can’t be considered surprising. It’s normal that we have frequency of claims. Also, if those so-called secondary perils were to take us completely by surprise, it would be really worrying”, he noted.
The climate change-related impact in frequency and severity cannot be considered surprising either, “as this is something we knew was coming and we all have to contribute to slow it down.” “We can’t blame everything on climate change though”, he said.
In Pérez de Lema’s opinion, the climate emergency clearly shows the need for everyone in the industry “to identify and manage risks properly and also charge a proper price for the risk that we are taking”.
Finally, regarding MAPFRE RE’s adaptation to the impact of Covid-19, the MAPFRE RE CEO says that it was on the whole, manageable, given that they were not involved in some of the most affected lines of business. However, the pandemic has shown the potential impact of certain risks, which for Pérez de Lema “reinforces once again the need for extremely rigorous risk and coverage definition and limitations. As an industry, we can’t be exposed to making promises that we simply can’t keep.”
On Hurricane Ida estimations, he says “it looks like the global CAT result won’t be good again this year”.
Moving on to cyber risk, the reinsurance executive believes it can only go in one direction: up. “There is no doubt there will be more demand for coverage. In five years, we will for sure be in that arena.” “Our view is that there is still a way to go to define coverage”. MAPFRE as a Group is already selling affirmative cyber products in some markets, particularly in Spain, for particular client segments.
Final questions revolved around ESG (environmental, social and governance) investment, where Pérez de Lema recognizes a clear responsibility, and changes in the way we work after the pandemic. “Probably we need to work more on the ‘S’ part of it to make sure society is better protected”, he stated.
On hybrid working models, Pérez de Lema noted that MAPFRE RE was already making progress there before Covid struck and is now gradually returning to ensure flexibility. “As a reinsurer, we are on the way, but we value personal interaction highly, which means being in the office. What we have been doing is crisis management and not flexibility”, and the organization is now regaining face-to-face contact with partners and clients.