Inside View - Better run to keep up!

(From Reinsurance)

Byline: Sal Zaffino, chairman and chief executive officer of Guy Carpenter &

As a CEO, part of my job is to keep on top of trends affecting the business. In my view, the marketplace is changing at a record pace - and it continues to accelerate. Our industry is experiencing so many critical changes concurrently. And, unlike in years past, our global economy means that events in one country often create ripple effects throughout the world.

Some of these changes pertain to our industry's reason for being: risk.

Risks have increased significantly as global values rise. In the US, residential construction costs rose by more than double the rate of inflation in the past year alone; meanwhile, millions of people in growing economies like India and China are becoming wealthy enough to look to insurance markets for financial protection.

In contrast, catastrophe losses are climbing. In the past five years, losses from events around the world totalled $127bn - an increase of 25% over the previous five years. And if some recent predictions are on target, this is but the tip of the iceberg.

According to a recent report from the Association of British Insurers (ABI), climate change may have monumental financial effects by 2080. The ABI report notes that the capital insurers would need to cover severe storms could rise by $78bn, with increases of 80% for Japanese typhoons and 90% for US hurricanes.