Senior executive officers from SCOR have said they are expecting to see increased demand for insurance as the market heads into the 2021 renewals, with primary players also looking to secure more reinsurance to protect their capital.
The comments came as part of the reinsurer’s planned releases for the annual Rendez-Vous meet-up in Monte Carlo, which was cancelled this year due to the COVID-19 pandemic.
Jean-Paul Conoscente, CEO for SCOR Global P&C, said that the impact of the pandemic on the market is going to be “long-lasting and global,” and argued that rate increases would have to go further to help maintain reinsurers’ profitability.
“Not only is it payback for some of the claims, it’s also the compensation for all the economic effects for all the actions governments and central banks have taken,” he explained.
“Technical profitability needs to improve. This isn’t a profitability that is short-lived, it will take several years to compensate.”
SCOR is also expecting to see increased demand for both primary insurance and reinsurance, with particular demand for the higher rated reinsurers.
On the supply-side, normally when rating improves more capital enters the market, but Conoscente believes that the influx of new capital will be limited and primarily directed to existing players.
“We have seen some more capital coming in, but the capital that’s looking at reinsurance as a diversifying area is also more cautious of investing in startups, it takes a long time to get to a scale that makes it very profitable,” he said.
In terms of the growth, SCOR is expecting a little less than half to come from price increases and a little more than half to come from portfolio extension.
“It will vary by market, not all markets will move the same,” Conoscente said, but added that high single digit and low single digit rate increases should be seen in all markets.
On the retro side, SCOR is still holding price discussions to decide whether it is better off holding or retaining more risk, but management says that changes in the retro market are not expected to change the company’s placement.
“We’ve spent a lot of time optimising our retro,” said SCOR CEO Denis Kessler. “We want to protect the book and the way we structure retro and the way we combine types of protection is something we’ve been working on a lot. I believe it should be done by November.”
Laurent Rousseau, Deputy CEO of SCOR Global P&C, also commented: “We’re very comfortable we’ll be placing our program, we’re an early placer of retro.”
Rousseau added that the firm was “comfortable retaining more risk” after raising €300 million of debt last week.
“We’re a strategic buyer of retrocession,” Conoscente concluded. “We’ve had the same leaders on our program for a number of years. We’ve already started discussions with them and we expect to have the first idea in the coming weeks.”