Zug, Switzerland based reinsurer SIGNAL IDUNA Reinsurance Ltd (SI Re) further enhanced the profitability of its book at the January 1st, 2024, reinsurance renewals, while cutting its exposure to frequency risks and growing its share in non-proportional covers.
The company, which is an affiliate of German primary insurer SIGNA IDUNA Group, has today reported a highly successful January renewal, with estimated premium volume up 2% year-on-year to €202.4 million.
At the same time, the reinsurer was able to rewrite around 16% of its third-party property and casualty business, which it explains is in line with its strategic goals of strengthening the resilience of the existing book while expanding into diversifying markets.
As a result of recent weather-related catastrophe losses in Europe, SI Re shifted into layers with higher attachment points, thus reducing its exposure to those frequency risks.
The company notes that as the premium of the renewed third-party book grew 6%, it acquired 12% new business, most of which was with new clients, which helps to further diversify the reinsurer’s portfolio.
Expanding on its 1.1 2024 renewal, the company highlights a reduction in coverage of proportional motor business in Eastern Europe “where the rate levels of the original portfolios did not develop in line with the economic drivers of claims inflation.”
SI Re also decided to reduce its exposure in the proportional agricultural market on the back of the intensification of unfavourable weather-patterns and subsequent changing market conditions.
Offsetting these reductions, SI Re entered the UK motor market, opting to write select non-proportional programs with a focus on personal lines. Additionally, the firm grew its client base in the DACH countries and also in the Benelux.
Bertrand R. Wollner, Chief Executive Officer of SI Re, commented: “We are highly satisfied with the outcome of this year’s renewal. As we continued on our route of enhancing our book ́s profitability and reducing its exposure to frequency risks, we further expanded our share in non-proportional covers. We thus maintain greater transparency and control of the risks we underwrite while improving our returns.
“In addition, we further enhanced our book’s profitability by adjusting our participation in small low-margin programs. While pursuing our goal of achieving economic sustainable margins and volumes, we maintain a cautious approach in the type of business SI Re engages in.”
Robert Salzmann, Head of Underwriting, ILS markets and Retrocession at SI Re, highlights a functioning market in this year’s January renewal, with continued market discipline.
“Although the friction in the retro-market has eased since its peak in early 2023, participants stick to higher attachment levels and tight terms and conditions. This spills to the reinsurers which trim their portfolios to reduce the impact from frequency losses. It further affects the insurers, which need to maintain rate adequacy in the original portfolios to cope with the increased retention levels. For proportional programs, which still present the most common and favored cover to cedants, reinsurers only provided capacity on very strict terms. This situation will continue unless the rate level of the original books of business have been improved visibly,” said Salzmann.
SI Re also notes a functioning market in Europe at the Jan 1st renewals, but adds that the market’s balance does remain fragile.
“On the one side, the market still thrives to limit its exposures. On the other side, the overall available risk capacity still lags behind the rise in inflation. Nevertheless, at this year ́s renewal the market was better prepared to handle uncertainties around the impact of inflation and the changing interest rate environment. In addition, over time reinsurers ́ investment returns will clearly benefit from the rise in interest rates,” said the company.
Commenting on the property market specifically, SI Re explains that much of the restructuring of French and German programmes took place in 2023, although the trend towards increased attachment levels and buying more capacity persisted.
“Regions like Norway, Sweden and Italy followed suit in the 2024 renewal, as these markets were impacted by heavy weather- related losses in 2023. Again, this year’s natural catastrophe losses exceeded USD 120 billion, mainly driven by frequency peril related losses. Being the 4th consecutive year of natural catastrophe losses exceeding the USD 100 billion mark, this ongoing development will eventually require a structural market adaptation to align to this new normal.”
