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Swiss Re sees long-term opportunities in changing market dynamics

10th September 2018 - Author: Matt Sheehan

Swiss Re views improvements in the overall market environment as a chance for the re/insurance industry to embrace new market dynamics, with companies that proactively develop relevant solutions most likely to benefit from long-term opportunities.

Swiss ReAlthough the current environment continues to be influenced by an abundance of capital, Swiss Re noted that rising interest rates are having a positive impact on investment returns and on long-tail lines of business in life and casualty insurance.

Looking ahead, the company identified digital solutions, the continued growth of risk pools, and the growing protection gap as representing the most significant growth opportunities for the industry.

“Together with our clients, we worked through a difficult environment after the 2017 natural catastrophe events,” said Swiss Re’s Chief Executive Officer (CEO) Reinsurance, Moses Ojeisekhoba. “By paying claims and helping to rebuild, we could again demonstrate the value of sharing risks.

“Although the market environment remains competitive with an abundance of capital, the long-term opportunities that lie ahead are positive as we address the very large protection gap that still exists. I am optimistic about our future growth.”

Across all lines of business, the global premium potential of the protection gap is estimated to be around US $800 billion, with roughly 2 billion people having no access to insurance and 70% of global catastrophe losses over the last decade going uninsured.

Swiss Re said that is attempting to address this insurance deficit with the introduction of new solutions such as its Flood Insurance Toolkit, which incorporates over 400,000 modelled events to allow U.S insurers to offer affordable, more accurately priced flood insurance.

The company has also developed fully digital parametric insurance offerings for natural catastrophe perils to provide cheap, automated cover for customers that may previously have been unaffordable or inaccessible.

Swiss Re said that it is expecting technology-based solutions, such as its range of parametric insurance products, to bring benefits across the whole re/insurance value chain and even change the nature of risk itself, through both mitigating and creating new categories of risk.

“In our view, trying different solutions aimed at addressing the protection gap is the only approach that will make a material difference,” continued Ojeisekhoba. “We already see that various elements of new technologies afford us an opportunity to break down some of the barriers.”

“At Swiss Re we see ourselves as part of the solution and will continue to collaborate with our clients, governments and other partners to bring tangible innovation that helps narrow the gap,” he added.

Swiss Re’s comments come after its CEO, Christian Mumenthaler, told Reinsurance News that the company is expecting reinsurance renewal rates to remain “broadly stable” given current levels of competition in the market.

“We believe an inflection point in the pricing cycle for non-life insurance has been reached,” explained Edouard Schmid, Group Chief Underwriting Officer at Swiss Re. “For 2019, we broadly expect stable rates, provided no major event happens this year. Underwriting margins in major non-life insurance markets need to improve more to deliver sustainable returns on equity.”

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