Rising reinsurance costs, fueled by climate change, could hike Philippine insurance rates

Increasing frequency and intensity of climate-related disasters are driving up reinsurance costs and impacting insurance premiums in the Philippines

Worsening climate change could drive up the cost of insuring personal assets, creating a domino effect from rising reinsurance costs, according to the Philippine Insurance and Reinsurers Association (PIRA).

In a briefing on Wednesday, March 5, former PIRA chairperson Eden R. Tesoro said the most recent wildfires that ravaged California could increase non-life insurance premiums’ costs. 

Tesoro, also the chief operating officer of Malayan Insurance, said that the market should expect price adjustments if their reinsurers happen to be among those affected by wildfires.

Reinsurers, insurance firms providing financial protection to insurance companies, will adjust pricing to ensure their stability, Tesoro said.

“As a rule, when you have this significant rise in reinsurance costs, then generally, the product will have to increase in price,” Tesoro noted.

As a result, insurers will also pass on higher reinsurance costs to policyholders through increased premiums, as maintaining current pricing would be unsustainable.  

According to Tesoro, non-life insurance premiums rose by about 10 to 15 percent in 2023 and 2024.

Meanwhile, PIRA Executive Director Michael F. Rellosa said non-life insurers cannot just raise premiums without the Insurance Commission’s (IC) approval.

Despite this, she noted that non-life insurers have various reinsurance sources. To date, the National Reinsurance Corporation (NatRe) remains the only professional reinsurer in the Philippines.

As per Jose Augurio N. De Vera Jr., NatRe’s non-life reinsurance head, reinsurance costs surged in 2024 due to a “hard market.”

Concerning risks, PIRA said that besides intensified climate-related events, the industry might also feel the impact of global politics. 

Rellosa warned of record temperatures before summer, which could lead to heavy rainfall.

“We’re gonna be hitting record temperatures and we haven’t even started our summer. If there’s record-high heat, it usually translates to record-high rainfall,” Rellosa said.

Meanwhile, Tesoro said US politics may not directly affect Philippine non-life insurers but could influence their investments in the country.

Further, the looming trade war between the world’s largest traders could spill over locally, impacting the insurance industry.

“Anything that affects the economy, we feel that in the insurance industry, either we insure less goods or the cost for example of preparing stuff locally would be more expensive because we import. So an increase in tariffs should also increase in prices,” Rellosa said.