Margins particularly attractive in nat cat risks, discipline being maintained: Swiss Re CEO

Swiss Re’s CEO Andreas Berger explained today that the company sees the current state of the reinsurance market as one where discipline is being maintained, which he believes is a new normal and must be sustained, while he also said that margins were particularly attractive for natural catastrophe risks in recent renewal rounds.

Discussing the state of the reinsurance market during a media call this morning, Andreas Berger commented, “I’m happy with the outcome of the renewals. This was solid, a good outcome, the teams have done a great job in negotiating the January, April, but also the June, July renewals.

“Market participants largely maintained discipline on terms and conditions, overall pricing is still attractive, with the picture across lines being more nuanced given the different stages of the cycles therein.

“This is important. It’s important because, as not all lines of businesses are correlated, we cannot talk about one single cycle. So there are many cycles, and that’s how we manage our portfolio.

“In property, despite a decline in risk adjusted pricing, we achieved attractive margins, particularly relating to natural catastrophes.

“It’s important to note that current reductions are occurring from healthy levels, which puts the observed pricing pressure into perspective.”

He went on to say that Swiss Re is pleased with “the discipline being maintained in the market.”

Berger continued, “We have been operating now for quite some time in a very healthy and constructive market environment and I think this is the new norm.

“This needs to be the new norm, because the reinsurance companies have to also earn their cost of capital, and that’s the main difference to the previous period, where we had a prolonged soft market cycle where we haven’t earned our cost of capital.

“This is not sustainable, we need a strong reinsurance industry to play the role as a shock absorber to back the insurance industry and ultimately the insurance industry is backing society, the ultimate end customer, the householders, the policyholders.”

He further stated, “So I don’t want to compare it to the last cycle, where we had a long, soft market cycle with a strong amplitude, and this, I don’t think will be happening again if we keep the discipline in the market.

“Price is only one aspect. The more important aspect that people should also look at is terms and conditions, and where are the attachment points where reinsurance is being triggered. So there’s a lot of discipline there. There’s healthy structures there.”