Thierry Léger, Chief Underwriting Officer (CUO) of Swiss Re, has said that price momentum in natural catastrophe reinsurance lines should last for at least another 1-2 years at today’s rate and potentially for longer.
Speaking at the Goldman Sachs European Financials Conference in Rome earlier this week, Léger explained that Swiss Re management sees nat cat lines as now being the hardest pricing market the reinsurer is competing in, with rates having built steadily over prior years.
He added that the expectation of continued momentum in these lines will be beneficial for Swiss Re, as the group should be able to increase profitability while also putting it in a position to choose risks proactively.
“The company is happy to write all the 190 modeled risks, but it will only write non-modeled risks if they are a small part of a wider portfolio,” Goldman Sachs wrote in summary of his comments.
The Chief Underwriting Officer also expects strong renewals in the June/July renewals season, as the recent increase in inflation and nat cat frequency has resulted in increased demand for protection.
For Swiss Re, he explained the mid-year renewals could be an attractive environment for both margin and growth, although its management sees casualty lines as slightly softer compared to nat cat pricing.
“On an absolute basis, casualty lines’ price momentum remains strong, especially in primary lines, but less of that is passed to reinsurers due to profit commissions,” Goldman Sachs reported. “Overall, management believes it is easier to achieve higher prices in nat cat than casualty.”
Léger concluded that nat cat remains one of the core businesses for Swiss Re and an insurable risk, despite greater difficulty to model than some other risks.
With a dedicated team and 190 separate models to underwrite, Swiss Re continues to feel that it has the expertise to model these risks and to pick the specific risks that it wants to write, so it will continue to target growth within its nat cat portfolio.
And although Léger acknowledged that climate change issues could be a concern, he also highlighted that worries around this issue should ultimately support further price increases and demand for nat cat covers.
