SCOR executives have said they are confident that the reinsurer will be able to “recoup” on its losses in the Caribbean and Japan due to the relatively short payback periods in both regions.
The company released its financial results for the third quarter of 2019 yesterday, which saw “heavy loss activity” impact its property and casualty (P&C) segment.
Catastrophe losses were primarily driven by a €92 million loss from Hurricane Dorian in the US and Caribbean, and a €89 million loss from Faxai in Japan.
Combined with above-average man-made losses, SCOR’s P&C business fell to a technical underwriting loss for the quarter.
Nevertheless, during a subsequent earnings call, Jean-Paul Conoscente, CEO of SCOR Global P&C, explained that losses were consistent with the company’s market share as the fifth-largest reinsurer in the Caribbean and the fourth-largest in Japan.
He added that the heavy claims bill in Q3 should help to maintain positive pressure on the rating environment ahead of the January 1 renewals, during which SCOR will be focused on improving its margins.
“As our business is largely proportional, we’ll benefit from the continuous hardening, primary insurance market, and we expect also improvements in the reinsurance pricing in terms for the same,” Conoscente explained.
SCOR is particularly optimistic about the prospect of recovering its losses in Japan, pointing to its 2011 earthquake losses in the region when price increases of around 25% meant the payback took roughly 4 years.
“The mentality of the Japanese clients is not just to give payback on the specific programs that were impacted but across the whole portfolio,” said Conoscente. “This is what was achieved after the 2011 losses, and we expect a very similar trend to happen at this renewal.”
During the earnings call, SCOR leaders also confirmed that the reinsurer had made some recoveries under its retrocessional program for both Dorian and Faxai losses.
“On both, we have some retro that is playing for us,” Conoscente said. “We have some proportional retro in Japan which provides some relief and a limited amount of retro on the Caribbean loss.”
He also confirmed that SCOR’s excess of loss and proportional retro is unaffected and remains intact ahead of any losses in Q4.
With industry losses on Typhoon Hagibis currently estimated to reach well-above the cost of Faxai, this indicates that SCOR could be tapping its retro cover on this event as well.
Group CFO Mark Kociancic cautioned that it was too early for SCOR to comment on losses from Hagibis, but stated that the company was confident of meeting its Q4 earnings goals.
Asked about SCOR’s plans for retrocession renewals, Conoscente stated that the company was already in the process of placing its retro, which would overall be “very similar to what we have today with more or less the same players.”
“As we do every year, we start discussions over the summer,” he clarified. “This year, that the market is much more difficult than in the past years, there’s been a retrenchment of some types of covers, especially around aggregate covers. But many of our expiring retrocession areas are continuing to provide us quotes and capacity.”
“Because of our approach to retrocession which has been kind of a long-term mentality and not opportunistic, we feel we have strong support,” he concluded.