French reinsurance giant SCOR has added roughly 10% in premium volume to its P&C reinsurance renewal book at January the 1st, with most of the growth seen in the United States.
The reinsurer expects that a firm market will prevail throughout 2019, with the potential for hardening of loss affected contracts at each of the key renewal seasons later in the year.
SCOR’s property and casualty reinsurance expansion continues, as has been seen with most of the major players over the last two years.
Repeated growth at renewals, despite pricing not really coming very far off the bottom of the market has been the strategy for all the major reinsurers, with the U.S. market seen as the main source of growth thanks to the ability to diversify shorter and longer tailed P&C risks against each other.
SCOR underwrote EUR 3.2 billion of P&C reinsurance premiums at 1/1 2019, an increase of almost 10% from the EUR 2.9 billion underwritten in the prior year. This growth is aligned with the reinsurers strategic plan, the company said this morning.
The most significant renewal growth was in the U.S. market, where SCOR has steadily expanded in recent years as well.
In the past SCOR was perhaps under-represented in the U.S. reinsurance market, meaning it had an opportunity for growth here.
Whether rates are seen as commensurate with the risk on a stand-alone basis remains to be seen over the longer-term, but right now SCOR and the other major reinsurers are able to grow their books and take advantage of rising insurance rates flowing through into higher reinsurance demand, as well as the broadening reinsurance product set that offers greater opportunities for diversified growth.
SCOR said it was selective at the renewals, declining certain business that did not have the right margin or risk profile, especially when pricing was deemed not to be sufficient, which it said included some very large proportional treaties this year.
SCOR said that the risk adjusted price increase of its renewal book was 1.3%, but expected profitability of the book would remain stable.
The reinsurer said that at the renewal reinsurance pricing was deemed “broadly stable” across all lines and geographies, but added that it benefits from rate increases in insurance business lines thanks to its operations in specialty underwriting, at Lloyd’s and through its MGA business as well.
Yet another sign that major reinsurers are increasingly securing their rate from the primary market, while the reinsurance market is flat and becoming increasingly diversified for them.
Victor Peignet, CEO of SCOR Global P&C, stated, “SCOR starts 2019 with strong January renewals, after having successfully renewed its capital shield back in fall 2018. Clients want to increase the business they conduct with SCOR; they value our client-focused strategy, strong ratings, and technical expertise. Thus we can grow premiums at the high end of the “Vision in Action” range, without sacrificing profitability.”
EUR 2.37 billion of P&C premiums were renewed, growth of 8.3% thanks largely to the U.S. market. EUR 836 million of global lines business was renewed, including more specialty insurance and this area grew by 13.7%, thanks to lines such as agriculture, credit and surety.
Looking further ahead, SCOR said that it expects the market to remain firm through the April, June and July renewals. By firm we assume the company means roughly flat overall, but with pockets of rate rises for loss affected accounts and specific underperforming lines.
SCOR said it expects, “The possibility of further hardening as contracts affected by the high number of nat cat and man-made losses in Q3 and Q4 2018 come up for renewal.”
Peignet concluded, “We expect favorable market conditions to be more pronounced through the spring/summer 2019 renewals.”
SCOR’s forecast is similar to the other major reinsurers and it is to be expected that they all continue to expand their books through 2019 at any opportunity.
There may be some squeezing of smaller reinsurers as a result, given demand increases are not likely to be at the same rate as the growth the four majors are seeing.
How this will affect the ILS market remains to be seen. But with a number of the largest ILS funds entering 2019 with still significant capacity available and likely to raise more before the middle of the year, it could make for a very interesting renewal dynamic come June.