Insurer and reinsurer SCOR saw an overall decline in estimated gross premium income (EGPI) of -12% for renewed business at the January 1st, 2023, reinsurance renewals, as the firm further reduced its exposure to natural catastrophe risks, and looked to optimise capital allocation by line and client.
SCOR notes a renewal season marked by a decrease in reinsurance supply and strong demand for protection from cedants.
The company’s goal was to improve the expected technical profitability and the risk-return profile of its property and casualty (P&C) portfolio, taking advantage of favourable reinsurance market conditions.
SCOR says that it has particularly focused on optimising the capital allocation by line and by client, as well as optimising the portfolio mix, in terms of risk diversification and the resilience of the technical result.
During the renewals, SCOR continued to grow in global lines, further reduced its exposure to natural catastrophe risks, strengthened profitable relationships with long-term clients, and reshaped its portfolio by cutting back in lines the most sensitive to both economic and social inflation.
Overall, these actions resulted in a decline of EGPI of -12% for renewed reinsurance business.
Roughly 67% of SCOR’s P&C reinsurance premiums, which represent 47% of the firm’s total P&C premiums, is renewed in January.
Within treaty P&C lines, SCOR has announced gross premiums renewed of €2.176 billion, which is a decline of 20.4% when compared with the January 2022 renewals.
In contrast, the firm grew its treaty global lines portfolio by 3.6% at the January 2023 renewals when compared with a year earlier, to €1.479 billion.
The reinsurer says that it has carefully taken into account changes in claims experience in its pricing, particularly for natural catastrophes, by revising the calibration of these risks. As a result, the 1-in-250-year net catastrophe PML has come down by 14%, following a 22% reduction in 2022.
SCOR says that this has been achieved via a 30% reduction in limits on cat-exposed property proportional covers and a 25% decline on aggregate XL, and through a significant increase in cedant retention.
The company also looked to deuce its exposure to the most inflation-sensitive lines such as US casualty and motor proportional.
Somewhat offsetting the decline in P&C, SCOR has continued to grow in global lines, with an increase in EGPI of 11% excluding agriculture.
As a result of the above actions, the expected net underwriting ratio of the renewed portfolio has improved by 2.5 to 3 percentage points, which stems from a rate increase of 9% before taking inflation assumptions into account.
SCOR says that the main rate increases were observed on property cat treaties, most notably in North America and Europe at 71% and 44%, respectively.
The firm also notes that it obtained better terms during these renewals, such as the exclusion of additional perils, higher attachment points and tightened reinstatement provisions.
Jean-Paul Conoscente, CEO for P&C at SCOR, commented: “In one of the best reinsurance environments witnessed in a few decades, SCOR is taking all possible steps to improve the risk-reward profile and technical profitability of its portfolio. To achieve this, SCOR has been particularly focused on controlling exposures, on optimizing the capital allocated to the various lines, and on diversifying its risk portfolio.
“I am confident: the technical profitability of the renewed portfolio should increase significantly. Market hardening looks set to continue, which will allow SCOR to continue to deploy its capital under favorable market conditions during the next renewals.”
Looking forward, SCOR is confident that the current P&C cycle will continue. The carrier is actively preparing the upcoming April, June, and July 2023 renewals in a positive market environment.