Last year's 1.1 reinsurance renewal was described as one of the toughest and most gruelling in recent decades. How would you characterise this year's renewal?
“From a reinsurance perspective, there were fewer surprises compared to last year, but it wasn't without its challenges. With retro capacity in place earlier than last year, the renewal was more orderly in the sense of a greater focus on price discovery, increased competition and many more requests to quote from brokers, who played a constructive role throughout the renewal.
“I would add that while the re/insurers have fared better in the first 9 months of 2023 than the past 5-6 years, the risk environment has not changed, in fact a new norm has been established. Geopolitical tensions even increased, inflation is still there, and the level of natural catastrophes remains at an elevated level. USD 100bn of insured losses related to natural catastrophes per year globally has become the new norm.
“It is therefore imperative that as an industry we maintain the underwriting rigor that we saw in the past few years in the primary market and during last year's reinsurance renewals.”
Were there any nuances in different lines of business (property, casualty and specialty)?
“Overall, we continued to see improvements in terms and conditions and emphasis across the industry to better understand, navigate and manage risk. No doubt there is still a lot of work ahead of us.
“On the property side, there was widespread recognition that primary insurers are best suited to absorb frequency losses, while reinsurers are best placed to act as a shock absorber. In general, supply and demand dynamics found an equilibrium with some oversubscription on the higher end of the Nat Cat programmes, however, lower attaching layers were not fully placed in several instances.
“While proceedings on natural catastrophe programmes were orderly, property per risk treaties remained challenging due to recent poor performance and lack of structural changes over a prolonged period. Reinsurance underwriters will have to continue their focus here to find a solution that is long-term sustainable.
“Despite additional pressure on loss trends and increased uncertainty particularly in US liability, whilst programmes got placed, it wasn‘t without challenges. We have observed moderated improvement on terms and conditions, but, in our view, not sufficient to compensate for loss deterioration and a challenging outlook .
“In specialty, what surprised me was cyber. The growth projections of our clients for 2023 did not materialise and clients opted to retain more, ceding less to the reinsurance market. This impacted particularly the proportional cessions.”
Was there any significant movement on contractual terms and conditions?
“No new topics were raised, as there are enough existing ones we need to solve. The industry saw the grief caused by ambiguity in wording during the pandemic and we don't want to experience a similar situation. Given the heightened societal and geopolitical tensions strikes, riots and civil commotion (SRCC) remains on the top of the reinsurer's agendas. Finally, we need to ensure appropriate war exclusions.”
How is Swiss Re helping clients to grow and uncover opportunities?
“In several ways. In some cases, the shift to higher attachment points in reinsurance programmes meant bigger self-retentions leading to capital strains. We’ve seen higher demand for capital driven quota shares that we've been able to structure often with our broker partners. Another example is we’ve deployed significant capacity to help clients grow into the renewable energy space.
“In addition, we continue to see increased demand for our Reinsurance Solutions, which are helping clients to leverage data and technology to get a different perspective on risk. Solutions like CatNet, Rapid Damage Assessment or our underwriting performance analytics, for example, are growing in popularity amongst clients.”
What’s the outlook for 2024 and the 1.4 and 1.7 renewals?
“It’s too early to tell. And in the absence of major losses or legal developments, we will be expecting another round of relatively normal renewals.
“However, already on 1 January, we witnessed a powerful earthquake hitting northern Japan. On 3 January, a JAL airliner carrying 379 people caught fire after colliding with a coastguard plane in Tokyo. And just a few days later Boeing grounded its Boeing 737 Max 9 planes after a door panel blew out. These events are tragic, and the considerable loss of life and damage is incredibly saddening. Our sympathies are with everyone impacted.
“These events along with political uncertainty across the globe inevitably factor into considerations for 1.4 and 1.7.
“Finally, it's important to recognise that the hard work during 2023 paved the way to a more predictable renewal this year. It's important the underwriting discipline is maintained to achieve a sustainable balance in risk sharing moving forward. “
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