SCOR’s cat claims come in under budget, with retro program assistance

France headquartered global reinsurance company SCOR has reported its Q3 results today and revealed that, despite the high frequency of natural catastrophe claims in the United States, the reinsurers nat cat ratio stands under budget.

SCOR has reported slower premium growth than its competitors this year, reporting gross premiums up 2.3% at constant exchange rates across its business and 2.9% for the property and casualty reinsurance business, at SCOR Global P&C.

This is far below the double-digit premium growth reported by some of its competitors, but SCOR has been growing its underwriting book steadily for many years now so is clearly taking a more cautious approach than some even in this firming rate environment.

Technical profitability has been impacted by the COVID-19 pandemic, of course, with SCOR’ P&C reinsurance unit reporting a combined ratio for the first nine months of 2020 of 100.7%.

But that’s lower than peers as well, suggesting SCOR has fared well so far this year despite the significant volatility reinsurance underwriters have faced.

Group net income comes out at EUR 135 million for the nine months of 2020 so far, with EUR 109 million delivered in Q3 alone as the impacts of COVID had largely been booked in previous quarters.

Net income is down roughly 66% on 2019 so far, but still the ability to deliver this positive net income in Q3 whifch has boosted the year-to-date result, is a sign of SCOR’s robust and defensive position when it comes to natural catastrophes.

Denis Kessler, Chairman & Chief Executive Officer of SCOR, commented on the results, “SCOR continues to demonstrate the relevance of its strategy and the resilience of its business model in the first 9 months of 2020. The Group continues to expand its franchise and delivers positive results despite major shocks the industry has had to face since the beginning of the year, which include the Covid-19 pandemic as well as a series of natural catastrophes and very large scale man-made events.”

Kessler also noted that, “The Group enters the renewal season in a very strong position to reap the benefits of the hardening pricing environment and the improvement of terms and conditions in the P&C market.”

The defensive position SCOR has which has enabled its P&C business to only report a 100.7% combined ratio even after all of the U.S. natural catastrophe and severe weather activity, is helped significantly by SCOR’s retrocession program again.

In fact, SCOR Global P&C’s Q3 2020 combined ratio was actually lower than the prior year, at 97.5% and signalling a profitable quarter of underwriting in P&C reinsurance for the company, despite the catastrophe loss activity.

Underpinning this is a nat cat ratio of 6.5% year-to-date, which is below SCOR’s 7% budget still, despite the impact of events such as hurricane Laura and the midwest derecho.

SCOR’s P&C net attritional loss and commission ratio stands at 88.3%, with the Beirut port explosion contributing some EUR 44 million of impact, net of retrocession.

Once again, SCOR’s retrocessional reinsurance program appears to have assisted in moderating the claims impact to a degree, with more claims ceded through the third-quarter as catastrophe loss activity rose.

On the pandemic, SCOR said that its estimate on the P&C side has not increased materially since the mid-year, reaching EUR 256 million.

But, demonstrating the very slow pace of claims being realised for the pandemic, SCOR said that as of September 30th 2020, only EUR 92 million of pandemic claims have actually been received, with just EUR 8 million paid.

This very slow pace of claims for the pandemic is one reason some in the ILS market are fearing trapped capital at year-end, as reinsurers are booking large IBNR reserves, but with claims running far behind and wanting to trap retrocessional collateral as a result.

SCOR said that the impact of a second wave of the coronavirus is only expected to have a limited impact for the firm.

On the life reinsurance side, SCOR reports the COVID-19 impact at EUR 233 million, largely driven by U.S. mortality portfolio claims and EUR 18 million for claims received in all other markets.

Once again for SCOR, the retrocession program appears to be helping the company moderate the financial impact of major loss activity, including the pandemic. It’s not possible to tell where any retro claims fall, but the company has a broad program featuring both traditional and alternative reinsurance capital providers.