Commercial Market Shifting Focus Toward Catastrophe Risk: Swiss Re

Buyers in the global commercial insurance market are shifting focus away from “entrepreneurial” risks and towards physical loss threats, including natural catastrophes, according to a new report issued by Swiss Re on Wednesday.

“At the trough of the recession, some of the top concerns of business risk managers related to core entrepreneurial risks such as the market environment, increasing competition, and market risk,” the report states. “Currently, attention is shifting back towards insurable risks such as business interruption and natural catastrophes.”

Risk managers for commercial buyers spent the past three years focused on the economic crisis, the report entitledInsuring Ever-Evolving Commercial Risks” says, arguing that between 2009 to 2011 insurable risks were “crowded out” by economic uncertainty. However, recent natural catastrophes have swung the pendulum back to concern over physical threats. “The experience of the worse catastrophe losses in 2011 (with over $370 billion in economic losses) seems to have left a deep impact on corporate risk perception.”

Swiss Re added that the relocation of manufacturing plants to high-growth markets with high exposures to natural disasters “has made risk management costlier and more complex.”

“Property risks are increasing, and their nature is broadening from traditional property damage to business interruption and even to less well-understood contingent business interruption (CBI) risk, which includes company supplier disruptions. Yet globally, CBI insurance coverage remains low,” Roman Lechner, co-author of the study said in a statement.

Current commercial risk adoption depends on the market, the study adds. Property lines accounted for 29% of direct commercial insurance premiums written in the U.S. and 50% in “high-growth” market Brazil in 2011. However, property lines only accounted for 13% of premiums in China where there is less private insurance penetration.

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