Swiss Re is optimistic about its own long-term pricing prospects, as well as those of the wider reinsurance industry, despite the persistence of challenging market conditions.
This is according to Moses Ojeisekhoba, CEO of Reinsurance at Swiss Re, who told Reinsurance News that the company was confident the competitive low-rate environment would improve in 2019 and beyond.
“I remain optimistic about the future because of the strong franchise Swiss Re has, and also because market subsidization of losses cannot go on indefinitely,” he said in an interview.
“There was some modest rate improvement in the January renewal round, and I believe the primary insurance market is also seeing signs of rate movement, which is a step in the right direction, in terms of market sustainability,” Ojeisekhoba explained.
“But in context of the quantum of claims from the last couple of years, and the rate erosion over the last decade or so, it’s clear that more is still needed. So I expect to see further price improvements in the later part of this year, when loss-affected business comes up for renewals.”
Ojeisekhoba said that Swiss Re’s strategy is oriented towards the long-term, and so is a strong advocate of ensuring that pricing takes into consideration the true cost of capital to avoid the risk that promises to consumers cannot be met.
Coming off the back of two consecutive years of elevated catastrophe losses, the re/insurance industry continues to deal with an excess supply of capacity/capital and an insufficient consideration of appropriate risk premium.
However, these unsustainable pricing conditions will eventually run their course, Ojeisekhoba said, particularly as global exposure continues to grow due to factors such as urbanisation, ageing societies, increasing wealth, and improved access to insurance.
“There will be more need for our product both from the standpoint of capital/capacity but also from the standpoint of knowledge and resulting innovation,” the Swiss Re exec claimed.
“I believe that our industry and its ability to help identify, quantify and manage risk is an essential building block in today’s rapidly changing world to create a better, more secure and more resilient future for all of us.”
In terms of the areas that Swiss Re sees as most challenging for pricing adequacy, Ojeisekhoba pointed to property nat cat as particularly competitive due to the fact that capital can flow more easily through ILS funds relying on third party nat cat modelling software.
“Regionally Europe was a challenging renewal after a lighter 2018 loss year and we passed on some opportunities that simply looked too aggressive from our perspective,” he added.