Impact of hurricanes and earthquakes on fire insurance premiums

Insurance companies cover themselves against the risks they run. They do so with reinsurers. These are capital-strong, international insurance companies that offer risk cover to insurers. Examples are Swiss Re, Munich Re and Hannover Re, where the Re stands for reinsurance.

Successive disasters in the United States and the Caribbean have led to high costs for insurers. American and Belgian insurance companies are insured with reinsurers worldwide. In the event of events leading to a large number of claims, insurance companies call on them to pay part of the damage. The fact that the reinsurers now have to deal with more claim files means that the prices Belgian insurers have to pay for reinsurance can rise. This in turn may cause fire premiums to increase in Belgium. Storms, floods and earthquakes are covered by fire insurance.

Also in the event of a severe storm in Belgium, insurance companies may have to pay out a lot of storm damage, which affects premiums. By way of illustration: in 1990, 'Almaver', which later became ADD, dealt with 8000 to 9000 claims after the severe storm of January 25.

In recent years, reinsurers have built up a buffer. Since they now have to temporarily suffer more losses, some major reinsurers, such as Munich Re and Hannover Re, already gave a profit warning. The exact impact of the disasters on fire premiums at Belgian insurance companies is yet to be determined. The hurricane season runs until the end of October, a clearer balance may be drawn up later.