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Moody’s warns emerging risks may limit re/insurance growth
Moody’s said insurers face greater modeling and pricing uncertainty as risks increasingly blend across casualty and financial lines.
Moody’s Ratings and Moody’s Insurance Solutions warned that insurers are dealing with a more interconnected and uncertain emerging-risk landscape that is harder to model, price, and manage, potentially constraining re/insurance growth.
In remarks delivered at the Rendez-Vous de Septembre in Monte Carlo, Brandan Holmes, SVP at Moody’s Ratings, said the “center of gravity” for emerging risks is shifting away from traditional business boundaries. He added that the cost of not fully understanding how risks interact can be significant, noting that financial and systemic risks are intertwined with insurance impacts.
Moody’s also pointed to macroeconomic and market conditions, saying it expects economic growth to be steady but tepid. The firm cited growth of about 1.5% in developed markets, versus around 4% in emerging markets, and said weak growth in developed economies where most insurance capital is located can intensify competition and suppress pricing power.
Moody’s Insurance Solutions, led by Joe Melly, Head of Casualty and Financial Lines, said risks are becoming increasingly concentrated in casualty and financial lines as barriers between categories blur. Melly emphasized that uncertainty, not only severity, matters because emerging risks are inherently uncertain, and a lack of complete understanding can lead the industry to price risks in a overly conservative way.