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For this week, I decided to use the openness of the prompt to look at how secondary perils are affecting how reinsurance responds and prices their programs. Secondary perils, like wildfires, floods, strong thunderstorms, and hail, used to be seen as relatively minor and more manageable than primary perils (e.g., earthquakes, hurricanes). But that's no longer the case. These events have become more frequent, severe, and costly, often surpassing losses from primary perils. They are now major drivers of natural catastrophe losses globally. Reinsurers that have programs that are set up to cover "in excess of" programs have been especially concerned about the rise in these perils and pricing has shown that. I found an article put out by Swiss Re in 2024 that actually talks about Canadian secondary perils, but the concern is global. The article highlights some concerns that reinsurance has, specifically when it comes to pricing. These perils can be extremely localized and unpredictable (think about how many strong thunderstorms we get in the South this time of year). Models that have been used for primary perils do not work for this type of risk, which means that insurers and reinsurers have to work together closely and share data so effective models can be developed and pricing can be appropriate (not overpriced or underpriced).

The article mentioned one thing that has not changed, which is that reinsurance has always been more than just providing risk transfer for primary insurance carriers. They are partners that can provide support in terms of research, risk control, risk management and many other services for their primary carriers and their policyholders. This continues even today.