The reinsurance industry needs to secure more rate increases for the industry to reach the point of a long-term sustainable market, according to Swiss Re.
The company said yesterday that it anticipates seeing further rate increases across loss-affected and underperforming business at upcoming renewals, while the rest of the market is expected to be broadly stable.
The reason rate rises are unlikely to be more widely seen across the market is the fact that the market remains awash in abundant capital, the reinsurer explained in Monaco at the annual Rendez-vous.
“To ensure a long-term sustainable reinsurance market, further rate increases are needed,” Swiss Re said. “The hurricane season that is now upon us highlights the importance of having prices that adequately reflect the risks.”
Swiss Re has achieved profitable growth across its reinsurance business in the first half of this year, which the company said was “underpinned by a strong increase in P&C treaty premium volume and price quality improvement across a broad-based portfolio.”
In addition the company has benefited from rate as natural catastrophe underwriting has been one of the main drivers of P&C growth for Swiss Re in 2019 so far.
Edouard Schmid, Chairman Swiss Re Institute and Group Chief Underwriting Officer, commented, “The recent experience of hardening rates in reinsurance mainly reflects the response to higher loss occurrences and adverse trends in natural catastrophe markets and other affected segments.
“Our deep knowledge, experience and diversification make Swiss Re a strong partner for our clients in underwriting natural catastrophe risks while generating attractive returns on capital.”
Speaking during the reinsurers annual Monte Carlo media briefing, Swiss Re’s CEO Reinsurance Moses Ojeisekhoba explained that the capital markets have been a factor in keeping rates lower.
He said that the “barriers to entry are not that high.”
CUO Schmid added that while “2018 was an inflection point in the price environment” and the company has continued to see some strengthening of rates into 2019, capital still remains abundant.”
Schmid also noted that the reinsurance market has more work to do, as “profitability is clearly lacking in some business” still.
As a result of this and increased use of other retrocession, the reinsurer ceded roughly 4% more of its catastrophe risk exposure, compared to the prior year.