With rates in the catastrophe arena remaining attractive, global reinsurer Swiss Re expects growth in natural catastrophe premiums of around $400 million in 2022, as the company’s budget for losses from these events in P&C Re rises to $1.9 billion for the year.
During the global reinsurer’s 2022 Investor Day, Swiss Re underlined its commitment to growing its nat cat book of business at attractive rates.
The company’s nat cat premiums include the sub-portfolios: catastrophe excess of loss, catastrophe quota shares, and catastrophe aggregate excess of loss. And it’s within the cat XoL part of the business that Swiss Re expects to see sustainable growth.
Moses Ojeisekhoba, Chief Executive Officer (CEO) of Reinsurance at Swiss Re, explained that the firm finds cat XoL “very attractive because of the amount of data that we have, the way we are able to align risk and premium much better, markets’ reaction overall to ensuring that the premiums that are being generated cover the exposure adequately.”
“So, from a cat XoL standpoint, it’s a space where we want to continue to grow,” he added.
In contrast, Swiss Re has been de-risking its cat aggregate exposure since 2019 in light of trend risks, notably the rise in frequency and severity of so called secondary peril events.
On the cat quota share side, the presentation shows that the reinsurer is targeting enhanced profitability. At the Investor Day, however, management was questioned on the company’s participation in some of the larger quota shares, and specifically how they control some of the cat aspects, given that it appears some of the quota shares feature a lot of cat because they relate to fairly cat exposed writers.
In response, Group Chief Underwriting Officer (CUO), Thierry Léger, explained that there’s different ways Swiss Re manages catastrophes in its quota shares.
“Very generally, we want either nat cat to be excluded, or protected by a reinsurance program, or simply limited,” he said.
Adding: “We do not typically accept unlimited nat cat exposures in any of our quota shares, which, by the way, makes it a bit more difficult for us to grow into that space because sometimes there are unlimited of these quota shares. So, that’s a general underwriting rule that we apply to our underwriting of quota shares, whether it’s the very big ones or the smaller ones.”
So, while there’s different aims within the sub-portfolios of Swiss Re’s nat cat business, overall, the reinsurer is dedicated to expanding this part of the business, with nat cat premiums forecast to rise from $3.8 billion in 2021 to $4.2 billion in 2022, which follows the reinsurer growing its nat cat-related premiums at the Jan 1st, 2022, reinsurance renewals by 24%.
To reflect the expected growth in nat cat premiums, and also the general rise in exposure from events around the world, Swiss Re’s nat cat budget for 2022 is $1.9 billion, which is up by $400 million on the $1.5 billion seen for 2021.
