As part of our REinsurance Month coverage we are conducting a series of video interviews to get the views of industry leaders on the latest topics and trends in the lead-up to the 1 January renewal.
Much of the focus for reinsurers in the casualty arena has been on social inflation and deteriorating loss trends on the underlying insurance business.
But speaking to The ReInsurer last week, Scor Global P&C deputy CEO Laurent Rousseau highlighted the impact of a lower for longer interest rate environment as he raised concerns that this may have been “underestimated” by some in the sector. He added that because the reinvestment rate on the asset side of an insurance company’s balance sheet has decreased meaningfully, “the adequacy of long-tail classes is further away”.
That means rates will have to increase “much more” to compensate for lower investment income, Rousseau suggested.
Also speaking to this publication, Swiss Re’s head of casualty underwriting reinsurance Jason Richards said reinsurers will push for “tighter” terms and conditions on wordings and apply pressure on commission levels during the upcoming renewal season. He said there are still “many” contracts with commissions in the mid thirties that are too high from a reinsurer perspective. On the underlying business Richards suggested rate increases will spread to more markets and lines of business as underwriters continue to manage limit and take smaller shares on programmes.
But BMS Re CEO Pete Chandler said that brokers will “push back hard” on attempts to cut casualty quota share cedes. He said he and his colleagues do expect pressure on casualty quota share ceding commissions from reinsurers, but clients’ use and understanding of data will play a key role in fighting back against such moves. In property cat the dynamics are different, and hardening conditions in a transitioning market are presenting growth opportunities for reinsurers.
We heard from PartnerRe’s Greg Haft that his company is poised for growth with the formation of a Global Cat unit. Haft, CEO of the new unit, said the launch will give the reinsurer a “holistic view” of cat across the group as it looks to be a leader in the business, deploying more capacity in 2021 if the market moves in line with its expectations.
Meanwhile, Ascot Group’s CEO Andrew Brooks acknowledged the opportunities available in the reinsurance market for growth but cautioned that they come with a “significant health warning”. Although he is positive about the opportunities he sees to grow Ascot’s book of business for the remainder of 2020 and into 2021, Brooks is also mindful to take a cautious approach and focus more on achieving the “optimal portfolio”. He noted that some areas of the business are still being underpriced and are not reaching levels which can be considered sustainable for the longterm. “On the reinsurance side, we actually feel that the international business is still underpriced and yes, there are opportunities on the retro side, but it warrants a huge amount of capital to be deployed to support the writings in those classes,” Brooks said.
Away from renewal pricing dynamics, last week we covered the issue of whether pandemic risk is insurable and what mechanisms might come into play to address the peril going forward. Munich Re chief underwriter Stefan Golling said that state-backed reinsurance pools are “the only way” to ensure that future pandemics can be insured.
Because BI losses occurred almost simultaneously across many sectors of the economy, they are not insurable by the private sector alone, he said, reiterating the need for governmentbacked reinsurance solutions to cover pandemic risks in the future. Insurers would help to assess risks accurately and organize distribution and claims settlement, Golling suggested.