In a press release issued yesterday at the Rendez-Vous de Septembre in Monte Carlo, ICMIF Supporting Member Swiss Re announced that it expects further rate increases for loss-affected and underperforming businesses and broadly stable rates in other areas, amid continued capital abundance in the reinsurance market. To ensure a long-term sustainable reinsurance market, further rate increases are needed said the reinsurer. The hurricane season that is now upon us highlights the importance of having prices that adequately reflect the risks.
The release states that fast-paced change is creating both challenges and opportunities for the industry, which is facing growing and ever-more complex risks, a wealth of data and a highly competitive market. In this environment, Swiss Re says it is supporting its clients with its risk knowledge and is building on strong partnerships and technological innovation to meet the increasing need for insurance protection.
Swiss Re's CEO Reinsurance Moses Ojeisekhoba (pictured) said: "The industry is changing for a variety of reasons. We are confident that, with our continued focus on the needs of our clients, the scale and diversification of our business, and our risk knowledge and R&D capabilities, we are in the right strategic position to address change proactively."
Swiss Re achieved profitable growth in its reinsurance business in the first half of 2019, underpinned by a strong increase in P&C treaty premium volume and price quality improvement across a broad-based portfolio. The natural catastrophe business has been one of the main drivers of P&C growth for Swiss Re this year. Large transactions, where Swiss Re combines its expertise and reliable balance sheet to meet client-specific capital management needs, have been another growth area.
Edouard Schmid, Chairman Swiss Re Institute and Group Chief Underwriting Officer, said: "The recent experience of hardening rates in reinsurance mainly reflects the response to higher loss occurrences and adverse trends in natural catastrophe markets and other affected segments. Our deep knowledge, experience and diversification make Swiss Re a strong partner for our clients in underwriting natural catastrophe risks while generating attractive returns on capital."
The re/insurance industry is changing at a faster pace than ever before
The abundance of capital in the reinsurance market has impacted the entire reinsurance value chain, says Swiss Re, with increased cost sensitivity, and a need for reinsurers to find new ways of creating value for primary insurers.
According to Swiss Re, the industry is also facing increasingly complex risks and a rapidly growing wealth of data. Some risks, such as secondary perils (eg wildfires, droughts, and floods) or cyber risks, are evolving and require new approaches, also to risk modelling. Increasing liability insurance costs in the US are another emerging issue as re/insurers have to find a way to model and price the impact of social inflation. At the same time, the announcement states, it is a challenge for primary insurers to use the wealth of data available as this requires profound know-how, specific skill sets and the right resources.
The re/insurance industry is not only confronted with a changing risk landscape, says Swiss Re, but also with growing exposures as the world's population increases, people live longer and accumulate more assets, especially in areas prone to natural disaster. Swiss Re Institute's latest sigma estimates that the combined protection gap for the main risk areas – natural catastrophe, mortality and healthcare spending – reached a record high of USD 1.2 trillion in 2018.
Swiss Re builds on its R&D capabilities, technology and partnerships to meet the increasing need for insurance
According to yesterday’s press release, the re/insurance industry needs to rethink access to affordable, relevant and effective risk management and insurance safety nets. Reinsurers have a crucial role to play in supporting clients along the entire value chain from innovation design to claims optimisation. Swiss Re says it is doing so by fostering partnerships with clients and companies from outside the insurance industry to develop innovative, technology-based solutions which help close protection gaps, tap into new sources of growth, and deliver better products and services to the end-consumer.
Swiss Re's CEO Reinsurance Moses Ojeisekhoba said: "As a risk knowledge company that leverages technology and embraces innovation, Swiss Re will fully leverage its capabilities to support its clients in this rapidly changing environment. We see good opportunities as we partner with our clients to meet the growing need for insurance protection. These partnerships are key, as in the end, we're only as successful as the partnerships we have built."
- Swiss Re expects further rate increases for loss-affected and underperforming businesses and broadly stable rates elsewhere as capital remains abundant
- In Swiss Re's view, the upward trend in rates needs to continue to reach a long-term sustainable reinsurance market
- Change in the industry is accelerating, impacting the entire re/insurance value chain
- Swiss Re is leveraging its R&D capabilities, technology and scale to support clients in managing increasing risk complexity, wealth of data and changing protection needs
Read the full press release from Swiss Re here.