Global reinsurance firm Swiss Re is expanding the remit of its Corporate Solutions division to offer commercial insurance solutions to mid-sized corporations.
The Swiss Re Corporate Solutions model has been to target the very large corporate risk managers, offering their balance-sheet and underwriting expertise to create large, often complex, tailored insurance and capital relief solutions.
Now however, Swiss Re is aiming to grow its commercial insurance business further, by moving into the mid-sized corporate market as a primary lead insurer, rather than just targeting excess layers of insurance programs as it had with the larger corporate buyers.
Part of the reason for this shift is that conditions have become very competitive in the large corporate insurance arena.
CFO of Swiss Re David Cole explained; “Prices for commercial insurance are under significant pressure, with many segments operating at unsustainable rate levels. In this environment, underwriting discipline remains key and management is taking actions such as reducing deployed capacity in certain excess layer segments.”
While this reduction in capacity deployed in the large corporate, excess layer business is happening, the shift into mid-sized corporate business is just beginning.
Cole continued; “We remain positive about the long-term prospect of a growing commercial insurance market and in particular in the opportunities offered to us by expanding into the Primary Lead sector to increase our differentiated value proposition.”
To give you an idea of the scale of the opportunity, Swiss Re estimated the commercial insurance market at $700 billion in size in 2015.
It has achieved top 10 status in the large corporate excess layers sector, a market of $120 billion where it wrote $4.1 billion of gross premiums in 2016. But it now targets the mid-sized corporate space, which is another $60 billion market, where it aims to add another $1 billion to $1.5 billion of premiums by 2020.
This expansion will provide new premium access to the reinsurance firm, in a market where it has not played as an insurer before.
But of course it has played there as a reinsurer, and has likely taken some of the risks that mid-sized corporate clients may cede to it directly in reinsurance transactions before.
This moving up the value-chain does put Swiss Re increasingly into competition with insurers it reinsures as well, how that is perceived remains to be seen.
The other questions on this strategy are around the ability to manage frequent claims, as with smaller clients you would naturally expect Swiss Re to pay more frequent smaller claims.
Of course the company has significant expertise in-depth and is utilising technology to answer business questions. It will need to put all its expertise to work, alongside technology, to ensure it can make writing smaller business risk a profitable endeavor. If anyone can do that, Swiss Re likely can.