Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Nat cat price momentum could hold for 2+ years: Swiss Re CUO Léger


Speaking at a recent analyst conference, Swiss Re’s Group Chief Underwriting Officer Thierry Léger explained that pricing is now hard in the natural catastrophe reinsurance space, but that further rate hardening is also expected.

thierry-leger-swiss-re-cuoThierry Léger was speaking at Goldman Sachs European Financials Conference in Rome earlier this week, discussing Swiss Re’s strategy and current reinsurance market conditions.

Léger said that the current hard market environment is good for Swiss Re, as a core provider of capital to insurance and reinsurance markets, meaning that the recent mid-year renewals were both accretive for margin and growth for the company.

Swiss Re continues to see natural catastrophe risks as core to its business, Léger explained to the Goldman Sachs analyst team and audience at the event.

It is a portfolio segment that Swiss Re wants to continue to grow, he said, adding that increasing concerns around the world about climate change should support both further price increases for nat cat reinsurance business, as well as growing demand for protection.

Nat cat reinsurance is now a hard market, versus the hardening market seen through the last couple of years, Swiss Re’s management believe.

In fact, nat cat business is perhaps the hardest market Swiss Re competes in, the analysts report Léger as explaining.

But, more importantly, Léger believes that price momentum in natural catastrophe business should continue for at least another 1 to 2 years at the current rate, perhaps even for longer.

This allows Swiss Re to increase its profitability, while also positioning it to be more selective on which risks to write as well.

The reinsurer intends to focus on the modelled risks it writes, having 190 different nat cat models available to it, but will write some unmodelled risks is they are a smaller part of the wider portfolio, Léger is reported to have said.

For the June and July reinsurance renewal season, Léger explained that strong increases are expected given the inflationary environment and recent nat cat event frequency.

This is driving an increased demand for protection, Swiss Re believes, which the company feels well positioned to capitalise on.

At this point in the cycle, Swiss Re’s management believes it is easier to secure higher pricing in natural catastrophe lines than in other areas of the business such as casualty.

The commentary from Léger and Swiss Re’s management view suggests particularly strong renewal outcomes for insurance-linked securities (ILS) writers of natural catastrophe reinsurance business at the mid-year renewals, which added to the books already constructed earlier in the year should see portfolios with high-performance potential held by many ILS fund managers for the rest of the year.

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