French reinsurance company SCOR is the latest to forecast a prolonged period of rate hardening across the reinsurance marketplace, saying that it expects prices to rises to be “significant, generalized and long-lasting.”
SCOR holds its investor day today and provided an update on its progress and reinsurance market conditions, with its opinion being that firming prices and rising demand will provide a tailwind for its business going forwards.
The reinsurer feels ” well positioned to capture profitable growth opportunities from the new supportive market environment,” leaving it to be “very positive” on property and casualty reinsurance market conditions, expecting “strong growth with positive pricing dynamics.”
Importantly, while the hardening of the reinsurance market is one dynamic set to drive profits for major players like SCOR, the company believes that COVID-19 is driving an increase in risk aversion, which will translate into higher demand.
COVID-19 and how it is changing the perception of major risks, such as a pandemic, will “drive higher demand for risk covers globally and therefore stronger growth for the reinsurance industry, on both the Life side and the P&C side,” SCOR explained.
As well, the pandemic and the ultra low yield environment are expected to be, “additional catalysts to an already hardening market on the P&C side.”
Denis Kessler, Chairman & Chief Executive Officer of SCOR, gave an appraisal of the reinsurers progress this year, under the shadow of the pandemic, “With the Covid-19 pandemic, SCOR has once again demonstrated its capacity to absorb major shocks combined with the resilience of its business model. Regarding the assessment of our exposure to the Covid-19 pandemic that we provided at the end of July 2020, on the P&C side, claims are developing as expected. On the Life side, at this stage, claims experience is emerging better than expected.
“In addition, the pandemic has also exacerbated society’s growing aversion to risk, creating the conditions to drive stronger growth for the reinsurance industry. SCOR is uniquely positioned to benefit from the hardening of the pricing environment and improved terms and conditions. SCOR is well on track with the execution of its strategic plan “Quantum Leap” with a faster than expected profitable growth prospect on the P&C side, and reaffirms its strategy based on consistency and transformation to enhance value creation.”
SCOR expects positive growth in premiums for its P&C business this year and notes that going forwards, “The Covid-19 pandemic is leading to a reinforcement of the P&C (re)insurance market hardening which is expected to be significant, generalized and long-lasting. The outlook for the P&C (re)insurance market is very positive.”
SCOR Global P&C will aim to “benefit from the upcoming hard market across the risk-to-capital value chain,” the company said.
Growth in 2021 is expected to be stronger than the current year, with the SCOR P&C business expecting premiums written to rise by around 11% next year and forecasting a combined ratio of 95% or below.
On the impacts of the Covid-19 pandemic so far, SCOR noted this morning that claims to its life business are developing better than expected, while on the P&C side they continue to run at expected levels.
The major reinsurers are talking up rates currently, with them all hoping for persistent hardening across a wide swathe of the reinsurance market, lasting into 2021 or beyond.
It’s going to be an interesting renewal as a result, as it is the big four reinsurers that apply the rate pressure in many locations and lines, so the discipline and determination of the major players to support rate increases will be either evident, or absent, depending on how committed they actually are to this (European treaty business being a key area of the market to watch).