Swiss Re’s Ojeisekhoba: Liability lines require multiple years of “double-digit” rate rises

Casualty lines require multiple years of “double-digit” rate rises if they are to make up for years of underpricing the risk, according to Swiss Re’s reinsurance CEO Moses Ojeisekhoba.

Moses Ojeisekhoba – Swiss Re

Speaking to The ReInsurer, Swiss Re’s reinsurance CEO Moses Ojeisekhoba said it is “abundantly clear” that the scale of claims being driven by social inflation could not have been contemplated in underwriters’ pricing and terms and conditions over the last decade and that liability lines require significant rate increases over multiple renewal seasons if they are to catch up with loss cost trends.

“While pricing in liability lines is robust at this point in terms of the rate rises, it is very clear that they need to catch up,” he explained. “They need to catch up for severity of losses and frequency of losses that’s higher than what was expected.

“We now see that prices need to be in the doubledigit range in the liability lines for a few years, not just one year, for a few years, in order to be able to catch up with the loss cost.”

On the property side, Ojeisekhoba said that increases in the mid-single-digits to high-doubledigits range is required. This is not only because of an increase in exposure but also as a result of a “systemic” reduction in pricing from 2012 to 2018.

“Underinsurance remains a staggering opportunity for the insurance sector”

“On the property side or the nat cat side, our view here is that pricing needs to increase, depending on the region. We will need increases in the mid-singledigits to high-double-digits range for a while to come,” he said. “That’s also being driven by an increase in exposure but also because there was a systematic reduction in pricing by almost 40 percentage points over a period from 2012 to 2018.”

A balance needs to be struck between the need to create an ordered market and to provide an adequate return for capital providers, he added, noting that pricing risk appropriately is the only way to ensure capital providers are remunerated and that the market can remain stable.

If you have capital providers into a particular industry and they don’t generate the returns that they expect, it’s only a matter of time before they begin to make their feelings known by how they act, which is to walk out of the industry. “That is the worst thing possible because you then don’t have stability and sustainability for customers.” He added: “It’s far better to think about the sustainability of the industry which means you must cover the return for the capital providers and make sure that capacity is then stable. The only way to do that is to make sure you price for risk appropriately.”

Systemic in nature

While Ojeisekhoba Ojeisekhoba provided a bullish outlook on rates, the executive urged more caution on cyber risk.

“We only put out a certain amount of capacity, we only have a certain amount of market share and we’re completely comfortable that market share in the cyber world is underweight relative to our capital and relative to our size on a global scale,” he explained.

Non-affirmative, or silent cyber, remains a key concern, he said. “The industry is increasingly moving more towards affirmative cover, moving away from silent cover because that’s partly what can create significant mayhem, that you have exposure but you don’t even know you have.”

Another issue is capacity. Ojeisekhoba warned that there is simply not enough capacity in the market to address the totality of the cyber exposure that’s out there. As a result, cyber risk requires government intervention and state-backed (re)insurance solutions Ojeisekhoba added, noting that global interconnectivity has made cyber a systemic risk.

”We now view prices need to be in the double-digit range in the liability lines for a few years, not just one year, for a few years, in order to be able to catch up with the loss cost”

“There’s been far greater connectivity around the entire world and you can imagine some of the worst case scenarios that are possible, for example an attack on the electricity grid in a particular country or malware which manifests itself in 200 countries at exactly the same time and brings commerce down.”

He added: “We’ve always taken the view that this is systemic in nature and requires government solutions in place.

“We continue to believe that the public sector also has to be part of the solution. It can’t just be the private sector alone.”


While Ojeisekhoba advocates government intervention on cyber risk, he urged the industry to engage with policymakers on systemic risk solutions and pointed to the wealth of knowledge and experience the global sector has to offer.

“We’ve got lots of knowledge, we’ve got lots of experience, we’ve got lots of expertise. We also have tremendous infrastructure that can be part of the overall solution as well,” he said.

The Covid-19 pandemic has also placed a focus on the need to establish long-term private-public (re)insurance solutions to cover pandemic risk. Ojeisekhoba praised the “constructive discussions” taking place between policymakers and the industry, particularly in the US and in Europe, and noted that solutions will tend to be at a national, rather than at a regional level. The prevalence of state-backed flood and terrorism pools should further encourage the industry as to the possibility of success in such partnerships, he added. 

However, the executive noted that such conversations with governments can throw up challenges. “I think that the very nature of trying to have collaborations and discussions with governments across the entire world can be challenging. There are different elements and levels of efficiency that exist within the respective governments and there are different levels of strategy and vision that different governments have,” he explained.

Ojeisekhoba further raised concern that many governments may be unwilling to look at long-term solutions when they are under pressure to think about winning voter support in short- to medium-term election cycles. “Some [policymakers] think ‘we’re in government for four years, we need to think about what allows us to stay in power for the next four years’ and we’re talking about solutions that should respond for 100 years. Nobody has time to think about that,” he said.

Protection gap

Outside of pandemic risk and cyber, underinsurance remains a ”staggering opportunity”, not just for Swiss Re but for the entire sector, Ojeisekhoba said.

He pointed to the recent findings of Swiss Re Institute’s annual Macroeconomic Resilience Index which found the global combined insurance protection gap for mortality, health and natural disaster risks has reached a new high of $1.24trn. “That’s a staggering number in terms of the gap,” he said. “But the way I prefer to look at it is that it’s a staggering opportunity also for the industry if we are able to come up with the right products, the right way to distribute it, the right partnerships, in a way that activates the demand and the consumption at the other end.”