One of the key takeaways from Swiss Re’s Fireside Chat with Goldman Sachs was that management highlighted its views on the hard market momentum and the impact of interest rate increases.
John Dacey, Chief Financial Officer of Swiss Re said that the hard reinsurance market cycle is persistent, and the company is seeing the momentum continue in June/July renewals, driven by a strong demand-supply imbalance.
However, despite higher pricing, firm is not seeing a much higher volume of business underwritten as it is more focused on moving higher up in the layer.
According to the CFO, says Goldman Sachs, ILS funds are not stepping in at this time, leading to the imbalance in the supply of capital.
Analysts note that this is partly driven by the increase in interest rates, which means the high yield is available with lower risk, but also by high catastrophe losses since 2017, which has led to trapped capital and driven increased caution among the ILS sector.
“We note that we have seen the reinsurers move towards higher-layer XL treaties. The CFO doesn’t expect the pricing to soften even at 1/1 renewal but could see a moderation in the rate increases,” say analysts.
