Bridging the risk perception gap: A call for technical reconnection
As the reinsurance community gathered in Baden-Baden this year, conversations were shaped by the aftershocks of 2023 hard market. While we are entering a ‘hard market softening’ today, a widening gap exists of how cedents and reinsurers perceive and price risk.
In “Bridging the risk perception gap,” Thomas Kroely, Managing Director, Head of Howden Re France, Belgium & Luxembourg and Tobias Andersson, Head of Continental Europe, Howden Re International, explore with this divergence means for the industry and how a technical reconnection can close it.
Andersson commented: “The future lies in reconnection. Not just between cedents and reinsurers, but between perception and reality, between risk and protection.”
Kroely commented: “For this renewal, and for the next, let’s move the conversation beyond capacity and pricing. Let’s talk about how we close the gap in risk perception – and build a more resilient, better-aligned market.”
The paper highlights three areas where this disconnection is most pronounced and where practical solutions exist:
- Retention covers: The retreat from aggregate and frequency layers has left insurers exposed to climate-driven secondary perils. Howden Re advocates for renewed focus on data granularity, frequency risk analysis and innovative protection mechanisms to reclaim this lost layer of security.
- Motor Third Party Liability: Inflation uncertainty continues to challenge pricing alignment. Parametric models, replicating indemnity drivers such as disability rates and age profiles, offer a new way to bridge inflation assumptions between cedants and reinsurers.
- Subsidence: Particularly acute in France, this peril illustrates how limited data can erode reinsurer confidence. Howden Re’s collaboration with climate analytics firm Reask demonstrates how parametric triggers and stochastic modelling can rebuild trust through measurable, transparent risk indicators.
With reinsurance returns stabilising, Howden Re argues it is time to move beyond “brute-force discipline” and towards technical discipline, combining structured methodologies with deep understanding of the evolving risk landscape.