Rates that primary insurers pay reinsurers to help them shoulder risks for clients need to rise following last year’s record catastrophe claims, according to the head of Allianz SE (ALV)’s reinsurance arm.
“Pricing is in general not at the level where it should be,” Amer Ahmed, who took over from Clemens von Weichs as chief executive officer of Allianz Re at the beginning of this year, said in an interview in Munich. “Customers have to accept that if they want their reinsurers to offer a sustainable coverage, they need to pay a fair price for that.”
Earnings of insurers and reinsurers were hurt last year as near record-low interest rates cut investment income and claims from natural disasters, including the earthquakes in Japan and New Zealand and the floods in Australia and Thailand, exceeded the previous high in 2005. Allianz Re, which gets about 80 percent of its business from other units of Europe’s biggest insurer, posted an operating loss of 101 million euros ($134 million) last year after a profit of 355 million euros in 2010.
Allianz Re would expect a profit of 300 million euros to 400 million euros in a “normal year,” Ahmed said. “We even have the opportunity to enhance that a little.”
Allianz Re, which gets most of its third-party business from Asia, saw its combined ratio, a measure that compares costs and damage claims with premiums earned, worsen to 108.2 percent last year from 93.2 percent in 2010.
“In the January renewals, we made some adjustments,” Ahmed said. “We are no longer carrying unlimited exposure like we did in proportional reinsurance in Thailand last year.”
From August until November last year, Thailand’s worst floods in almost 70 years killed more than 800 people, inundated two-thirds of the country and disrupted output by manufacturers from Western Digital Corp. to Honda Motor Co. Insurers and reinsurers may face claims of about $10 billion from the disaster, according to Munich Re, which estimated last year’s insured losses from natural catastrophes at a record $105 billion.
Ahmed, who was born in Pakistan and holds British citizenship, has worked for Allianz since 2002 and became chief risk officer at the reinsurance unit five years ago.
Premium income at Allianz Re declined to 3.8 billion euros from 4.3 billion euros in 2010 as a quote-share agreement ended with Munich Re, the world’s biggest reinsurer.
To contact the reporter on this story: Oliver Suess in Munich at firstname.lastname@example.org