Swiss Re sees increasing demand for  reinsurance in volatile environment

• Growing demand for protection in property and specialty lines driven by elevated natural catastrophe risks, macroeconomic instability and politically charged environment
• Refined data and modelling, as well as optimised capital management important topics in the current environment
• In casualty, elevated litigation environment in the US a growing concern for the industry

Monte Carlo, 9 September 2024 – As the insurance industry convenes for the start of the renewals at the Rendez-Vous de Septembre, Swiss Re expects growing demand for reinsurance protection to be a key topic of discussion. The conversation will also revolve around forward-looking risk assessment and capital management – as adequate risk views and volatility management are important requirements in the uncertain environment.

Urs Baertschi, Swiss Re's Chief Executive Officer Property & Casualty Reinsurance, said: "The key topics for the industry remain largely unchanged from last year, but the challenges have intensified, leading to higher demand. Faced with elevated natural catastrophe risks, economic uncertainty and geopolitical instability, reinsurance is the natural way for insurers to protect themselves from outsized losses. We are ready to support our clients with our capital, expertise and solutions."

More demand for property and specialty

Higher property values, urbanisation and rising repair costs due to inflation are expected to drive demand for property re/insurance, especially in areas with intensifying natural catastrophe risks. According to Swiss Re Institute, 2023 was the fourth consecutive year with global insured losses from natural catastrophes above USD 100 billion, and 2024 is heading in the same direction, with insured losses of USD 60 billion in the first half of the year, 62% above the ten-year average.

Swiss Re also sees growing demand for re/insurance in engineering in line with the positive outlook for the construction industry, especially for renewable energy projects.

To support the green energy transition, Swiss Re launched a Centre of Competence for Renewable Energy in 2023 to support its clients with expertise and products in managing their renewable energy portfolios.

The cyber re/insurance market is primed to continue its growth trajectory as awareness of both the frequency and sophistication of cyber attacks is increasing following several incidents this year. Here, the management of accumulation risk will be critical to allow efficient capital allocation.

US litigation environment growing concern

In the US, the elevated litigation environment poses a growing concern for the industry. US liability claims growth has outpaced economic inflation over the last decade, according to Swiss Re Institute, driven by a growing number of large court verdicts, and there is no sign of this trend abating. In 2023 there were 27 cases of courts awarding more than USD 100 million in compensation.

Based on current trends, the impact of claims growth will outweigh the benefit of higher interest rates on casualty lines in one to two years, in which case available capacity may drop further.

Reliable risk assessment and effective volatility management

What insurers, corporates and the public sector need from reinsurers goes beyond the core function of providing risk capacity. Modelling expertise to stay on top of the changing risk landscape, up-to-date assessments and management of exposures are becoming even more essential.

An important prerequisite for modelling improvements is effective flow of data through the risk value chain. As perils arise or intensify – such as extreme weather, rising jury awards in the US or cyber threats, accurate and timely data is essential to recalibrate models and provide forward-looking scenarios that enable risk-adequate pricing. To achieve this, an expert-led conversation across the insurance value chain will be essential.

Beyond risk transfer, insurers are turning to reinsurers for value-adding insights and solutions that can help them better understand and mitigate risk, unlock innovation and improve performance. Capital and volatility management are further immediate concerns for insurers, especially given the current economic uncertainty. In this regard, structured reinsurance solutions can provide protection to smooth out volatility and support growth plans by improving capital management efficiencies.

Gianfranco Lot, Chief Underwriting Officer Property & Casualty Reinsurance, said: "The insurance industry has shown time and again that it can rise to the challenge of a rapidly changing risk environment. To further progress as an industry, we need to leverage data better to predict future risk without being too anchored in the past. As a reinsurer we want to be a facilitator for our clients, helping them achieve greater precision to manage what's ahead of us."

Media conference

Swiss Re will hold a hybrid media conference in Monte Carlo and via Zoom this afternoon at 14:15 CEST. You can find more information and register here.