The natural risk rewriting market is still “very difficult” at the moment, according to Swiss Re CEO Christian Mumenthaler, who said today that some funds are “reluctant” to enter there.
Speaking on a press call this morning, Swiss Re CEO explained that the reinsurance company has changed its strategy.
As we first reported this morning, Swiss Re has shown continued interest in growth in the risk business in its reinsurance reforms this year so far, moving towards higher customer segments.
Increasingly in the P&C reinsurance business, but still working in property and cat risks, Mumenthaler explained, “Over time as rates have come down we’ve grown a similar business, and in the reinsurance this year so far, you’re seeing a little bit of a change in that.”
“The main reason is inflation and our view is that some of these comparable businesses are not getting prices to cover inflation. We have gone backwards. This is a slight change in history this year. “
But the risk of cats in particular, the CEO said, “We increased by 23%. We see that this is a very attractive market, it is very difficult.”
He added, “You read about a lot of recycling people getting out of there.”
Then on the insurance-linked bond (ILS) market, Mumenthaler noted that investors’ appetites have not returned to where we saw them a few years ago.
“We see some funds that don’t want to go in, and because now there are other ways to get money in the financial markets at these rates,” he said, referring to changes in interest rates that would make other classes more attractive, at a lower rate. risk.
Despite this, Swiss Re itself continues to expand its use of alternative funds and has found that investors are still eager for the non-consolidated returns that a natural recovery can provide.
Swiss Re has also been working hard on its risk models, adapting them to provide a more up-to-date look at factors such as climate change and the growing risk that the market is facing in so-called secondary risks.
Swiss Re CFO John Dacey said the lender sees cat prices as reasonable at this point, “and that’s one of the reasons we’re open to expanding the business.”
He added that the models mean that the latest information on the risk of cats is included in the latest prices of Swiss Re, “We have significantly updated our models for losses that reflect the latest information we have on the impact of global warming. The prices we are getting reflect what we think is a lot of damage in some areas related to this.”
Mumenthaler also discussed the same issue, saying that the effects of secondary damage events are clear.
“The scientific consensus is that climate change is reflected in so-called secondary hazards, so we have floods and droughts, storms.
“So the load has increased and you can see it last year, you can continue to see it this year, because the biggest one this year was the flooding in Australia at the beginning of the year. This is number one for us, of course, but there was heavy snow in France. In South Africa it was a flood.
“That’s a lot of the middle-of-the-road events that come in the first half of the year.”
Mumenthaler added that at Swiss Re, “We realize that, we have invested a lot to have cats of the nat type and the secondary risks and handle it and get used to it. One of the things that you saw, I talked about the price increase, and this kind of change that we just brought.”
Which shows that some of the increased rates of nat cat Swiss Re used in the recent renewal of the insurance and ensure that the borrower pays his losses due to other problems and climate change.
Then, when it comes to whether climate change will reduce the volatility of risks and other sectors, Mumenthaler said it will still be possible to insure the risk, but it will be difficult.
“Yes, unfortunately, we will have them. But it does not mean that it is uncertain, if this is the next natural question.
“I think the insurance is still covered but it’s expensive and, sometimes, if there’s a flood or something like that, there might be, you know, areas that are going to be difficult to rebuild.”