Further reinsurance market hardening is expected in the months ahead as the severe flooding in parts of Europe in July and the more recent impacts of Hurricane Ida serve as a stark reminder of the issues at hand, according to Christian Mumenthaler, Chief Executive Officer (CEO) of Swiss Re.
In a recent video interview for the Artemis Live series from our sister site, Mumenthaler discussed the reinsurance renewals and the firming market environment.
“We shouldn’t forget that there were lots of losses in the industry the last few years, so the pricing levels were clearly unsustainable and if you stay unsustainable forever there’s not going to be any capital backing you,” said Mumenthaler.
Following a prolonged softened market, reinsurance rates started to move in a positive direction as underwriting discipline took centre stage amid poor returns and the lower for longer interest rate environment.
While still positive for reinsurers, price increases appear to have slowed in some areas in 2021 when compared with the prior year. During the interview, Mumenthaler stressed the importance of the long-term sustainability of these prices.
“I clearly think prices need to and will harden further. I think what happened in Europe is a stark reminder of the issues that are at hand, including climate change and its impact on secondary perils.
“Everybody could see it. Our clients could see it, their clients could see it, but also our investors could see it and clearly in the investor community there’s concerns around all of that which will put pressure on the whole insurance and reinsurance industry to earn thee appropriate returns,” said Mumenthaler.
Add to this the devastation caused by Hurricane Ida, which is currently estimated to have caused re/insured losses of between $15 billion and $25 billion, and the fact the Atlantic hurricane season is ongoing while the wildfire season in the U.S. has yet to peak, and it’s easy to see how this pressure builds up.
Furthermore, interest rates are still extremely low so players are less able to call on their investment returns to bolster performance when underwriting suffers. This means that discipline is key for companies as they look to improve margins and take advantage of the more favourable market landscape.
“So, I think with all these events this year, I doubt the mood will be to further softening at the end of the year. Everything I see points to further hardening,” said Mumenthaler.
You can watch the full 20 minute interview with Christian Mumenthaler, Swiss Re Group CEO here and the video is embedded below.