French reinsurer SCOR is lifting its target for premiums underwritten at its property and casualty re/insurance division, as it looks to take advantage of harder market conditions, which will result in an increase to its Nat Cat budget for 2022 and the company said it will need to further optimise its retrocession as well.
It’s SCOR’s investor day today and the reinsurance company has provided an update on its strategic plan, with the the “Quantum Leap” strategic plan now to be extended to run until the end of 2022.
The reinsurer aims to “seize the attractive long-term growth opportunities emerging from the fast-changing risk environment,” with the current market environment providing an opportunity for SCOR to “adapt and embark on its next chapter,” the company explained this morning.
Part of this and a critical piece of the SCOR business going forwards, one which suggests more retrocession and capital will be utilised, including possibly from third-party capital and insurance-linked securities (ILS) sources, is the fact SCOR aims to “rebalance its exposure towards P&C business to seize the opportunities created by the hardening market and attractive pricing conditions.”
A full strategic plan is going to be released in early 2022, but for now SCOR has provided a taster of what’s to come.
For SCOR Global P&C, the division where P&C reinsurance and specialty insurance are written, SCOR lifts its target for 2022 to gross written premiums of 15% ˗ 18%, from 4-8% in “Quantum Leap”, with a net combined ratio trending towards 95% and below.
That’s a significant increase in targeted GWP for the reinsurance company and includes an increase to the natural catastrophe budget for 2022 from 7% to now 8%, SCOR said.
SCOR is now adjusting the way it manages its Nat Cat budget as well, planning to set it on a forward-looking basis from now on.
Overall, this is SCOR looking to capitalise on the trends we’ve been seeing across reinsurance through 2021.
The company explained, “The long-term fundamentals of the (re)insurance businesses offer clear opportunities to further improve the Group’s performance. SCOR will make the most of the current heightened risk awareness environment, leading to higher demand and greater discipline, and will rebalance its exposure towards P&C business to seize the opportunities created by the hardening market and attractive pricing conditions.”
Laurent Rousseau, Chief Executive Officer of SCOR, commented, “SCOR’s franchise has never been stronger, the Group is poised to reap the benefits of its leadership position and seize the attractive long-term growth opportunities emerging from the fast-changing risk environment. The Group Executive Committee is focused on delivery and operational improvement to create sustainable, franchise-strengthening value for our shareholders. In the next strategic plan, to be unveiled in March 2022, we will focus on Culture & People, Business Leadership, and Financial Performance to transform the Group and build a differentiated value proposition for all stakeholders.”
SCOR Global P&C will have an increased focus on non-catastrophe business going forwards, as it tries to create a more balance portfolio and moderate significant losses from Nat Cat events.
Across reinsurance SCOR sees, “Strong growth opportunities in Europe, Fast Growth Markets, and Global Lines, with the best market dynamics in a decade.”
But specialty insurance is also a target and SCOR expects to balance its book more towards this growing P&C segment of the reinsurer.
SCOR’s plan is to redeploy capital towards the P&C business, leading to growth and as a result the need for more retrocession.
SCOR said, “The increased capital allocated to P&C will accelerate planned growth at a very attractive point in the cycle.”
But also noted that while growing it will, “Pro-actively reduce the adverse impact of Nat Cat volatility on its portfolio by limiting growth on Cat business, as well as further optimizing the P&C retrocession program in 2022 to better cover against Cat frequency claims.”
Which suggests SCOR’s aggregate retrocession arrangements are likely to expand, as the company looks to ward off the impacts from frequency loss events and some of the so-called secondary perils.
The increase in the Nat Cat budget also suggests that SCOR is aware that the global catastrophe and weather loss environment is changing, both as climate adjusts and exposures grow.
The budget is being increased for 2022 to “reflect the influence of climate change and rising trends of mid-sized catastrophic events,” SCOR explained today.
SCOR is clearly aiming to capitalise on market conditions and will attempt to grow its business significantly at upcoming renewals as a result.
There’s a strong likelihood the reinsurer calls on more third-party capital to assist in future, particularly for its retrocession program.