The reinsurance industry needs to secure more in the way of rate increases for it to be sustainable, according to Swiss Re’s Group Chief Executive Officer (CEO) Christian Mumenthaler.
Speaking in a video interview for the Artemis Live series from our sister website, Mumenthaler explained that Swiss Re is positive on pricing.
“Our outlook is optimistic. With everything that’s happened, I think the industry is obviously moving. You have in the corporate sector price increases for two years now, that are very significant and no signs of abating and they shouldn’t also, it is necessary.
“You see something a bit less extreme, but still increases in reinsurance. Year-to-date about 6%, we could see in terms of nominal price increase. Unfortunately because of lower interest rates about 4% of that goes away from an economic perspective and another 2% in our view goes away because we got tougher on assessing the risk itself, in particular in Japan for example,” he said.
“More is needed for the industry to be sustainable and I think everybody understands that,” he told us.
On the impacts of the COVID-19 pandemic, Mumenthaler said that re/insurers fare better than many other sectors of the economy.
He explained, “The reinsurance industry is lucky in a sense, compared to other industries, that the demand isn’t breaking down. You still have a lot of demand, if anything you have more demand.
But the one thing it has taught the insurance and reinsurance market is the importance of quality, in terms of the underwritten portfolio, risks underwritten and terms and conditions.
“Quality will matter right? I’m not saying this is a great opportunity to grow like hell. I think the whole industry needs to focus on quality,” Mumenthaler explained.
Adding that, “Compared to the ’99 soft cycle, which I also remember, terms and conditions haven’t deteriorated as much, by no stretch, there’s a very big difference.
“When we talk about terms and conditions we talk more about making sure that pandemic is not included in nat cat contracts. There the industry is in clear alignment, agreement between all the participants that it was not the intent, that’s not where we want to go.
“So we need to be more precise in the language, that’s the biggest change I’d say.”
You can watch the full 25 minute interview with Christian Mumenthaler, Swiss Re Group CEO here and the video is embedded below.