The floods were far more than just an economic issue, says Peter Skvarča of Sava Re.
A year has passed since the August 2023 floods. How would you describe the situation now?
The summer of 2023 in Slovenia was indeed very intense, with several nat cat events: hail and windstorms in June and July, and the most significant being the extensive floods at the beginning of August. The direct loss in the aftermath of floods is currently assessed at just under €3 billion, but the consequences cannot be measured in monetary units alone.
The floods were far more than just an economic or re/insurance issue; they were a major disruptor of the daily lives and routines of people and businesses as homes, cars, crops and, in the worst cases, human lives were lost. Floods damaged more than 16,000 buildings and forced more than 300 households in 21 different municipalities to relocate with the assistance of the national government—a project that is still underway.
What kind of activities followed last year’s events?
“Additional segmentation for these risks was feasible, resulting in rate and premium adjustments.”
The final flood loss figures for the Sava Insurance Group were significantly less than initially evaluated two weeks after the waters receded, and less than taken into account during the 2024 renewals, but the impact was not insignificant. The floods were an unprecedented event for the Slovenian market.
On one hand, they provided an opportunity to review the situation on the insurers’ side and, on the other, they encouraged clients to reconsider their insurance needs in line with the risks. Most of the losses in our group were suffered by Zavarovalnica Sava, which initiated several activities to improve management and understanding of its risk exposure to nat cat events, and some are still being developed. For example, these would include a push toward managing the household portfolio at the geolocation level in geographic information systems while attributing the individual risk with public and experience sources for risks such as earthquake, flood and hail. In line with better-quality risk information at the portfolio level, additional segmentation for these risks was feasible, resulting in rate and premium adjustments.
What does the future hold?
The first half of the year was successful for all our group companies, most of them surpassing the plans they set, with respect to both premium revenues and achieved margins, with our overall revenue closing to €1 billion. The second part of the year started with some losses, mainly nat cat-driven.
Even with relatively intense precipitation and storms in Slovenia in the middle of the year, our group witnessed a sizable event in July caused by a major hailstorm with hailstones up to 12cm in diameter and strong winds, but the amount of precipitation did not result in flooding.
Considering both years, the losses suffered fall into a severe convective storms category induced by climate change, which we can witness in our regional market and even more in several world markets.
Management of these changes not only by the re/insurers but also in open cooperation with governments and other stakeholders in individual markets will become a necessary upgrade to shape meaningful nat cat protection and avoid an insurance gap.
Management of nat cat risks will have to be understood and improved at the level of insureds, government and municipalities, the latter especially in connection with flood protection measures on site.
What impact do you see on 2025 renewals?
Judging the year by the first couple of weeks, the general signal would be that the cycle of hardening present in the past two years would come close to flattening or even flatten out with some signs of softening. However, the year has been developing in a negative direction with several nat cat events worldwide—some close to our region and, in the past couple of weeks, even in our own region.
As a global reinsurer, Sava Re has some exposure in most sizable nat cat events, but the impact has been reduced due to our international portfolio restructuring activities in the past couple of years. Sava Re believes that loss-affected regions will see some further adjustments of the conditions at 1/1 renewal, and the cumulative effect of the losses paid by reinsurers might further extend the cycle, or at least slow it down for a couple of quarters.
“The plan for the next year is to fine-tune our underwriting with no radical change in the appetite.”
What are you planning for your international portfolio?
Sava Re reviewed the entire underwriting strategy and all related processes years ago, and as a result of that a new robust strategic plan was set and approved. This plan offers us the necessary flexibility but helps us keep our long-term focus. The results proved that Sava Re’s approach has worked out very well, so we see no reason to change course.
The plan for the next year is to fine-tune our underwriting with no radical change in the appetite. The book is mature and well-balanced, with the top priority on how to maintain what was achieved and how to provide quality service to our partners along with continuing profitable growth to our shareholders.
Sava Re is open to some new opportunities. As per the forthcoming 2025 renewals, Sava Re does not want to jump on the “softening market” bandwagon. During the last couple of years, the market has shown needed improvements, but some segments are still lagging behind. At Sava Re, we feel that during upcoming renewals the market will address the peak problems remaining.
Do you have a general message for Baden-Baden?
Recent years have challenged our industry with a series of circumstances stemming from geopolitical events, macroeconomic developments and natural catastrophes in most regions of the world.
Due to the basic principles of diversification, long-term partnerships, adaptations and continuing efforts, reinsurance has remained a resilient industry in these ever-changing times. Bearing this in mind, we have to continue to offer our support to our partners in less favourable years as well.
Peter Skvarča is a member of the Sava Re management board. He can be contacted at: peter.skvarca@sava-re.si
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