According to the global reinsurer,  enhancing underwriting data, advanced modelling, and restructuring the insurance value chain will ensure a sustainable reinsurance market. Swiss Re also says it remains dedicated to collaborating with primary insurers to support growth in an increasingly uncertain world.

The global property re/insurance market is facing mounting challenges as losses from natural catastrophes continue to surge. Forecasts predict recurring insured losses exceeding US$100 billion annually, perpetuating the demand for natural catastrophe property reinsurance. Concurrently, the core risk drivers remain unaltered: extreme weather occurrences, urbanisation, elevated property values, and inflation.

Amid this backdrop, the non-life reinsurance sector is poised for growth surpassing the pace of GDP expansion, largely propelled by factors such as inflation and urbanisation. Swiss Re’s ten-year outlook for this market, denominated in USD, anticipates nominal growth at an approximate annual rate of 5.4%, or approximately 3% when adjusted for inflation.

In its latest report, Swiss Re says providers must strike a balance between reinsurance capacity and burgeoning demand. Primary insurers, it notes, are best positioned to absorb frequent and attritional losses, while reinsurers are returning to their fundamental role of aiding insurers in recovering from substantial loss events. Recent examples include the earthquake in Turkey earlier this year. This shift towards establishing a more sustainable equilibrium in risk sharing is anticipated to persist.

Secondary perils such as wildfires, floods, and hail are also emerging as significant discussion points. Modelling these perils remains a formidable challenge, compounded by the increasing evidence of climate change-induced extreme weather phenomena. Achieving predictability in outcomes necessitates enhanced data transparency and substantial investments in predictive capabilities. Swiss Re, in response to these evolving risk dynamics, has been vigilantly monitoring these exposures and taking strategic actions to navigate this shifting landscape.

The confluence of these factors underscores the need for a resilient and adaptable re/insurance market that can effectively respond to the ever-evolving global risk environment.

Reinsurers are planning ahead of 2024

In anticipation of the upcoming January 2024 renewal discussions between insurers and reinsurers at the Rendez-Vous de Septembre, Swiss Re has offered its insights into the current state of the insurance industry, shedding light on pivotal trends that are shaping the market. 

One theme expected to dominate discussions is the escalating demand for re/insurance protection in a landscape of volatility, accompanied by the need for returns commensurate with risk.

Swiss Re’s proactive stance, coupled with its commitment to data-driven decision-making, positions the company as a key player in fostering the resilience and sustainability of the reinsurance market amid evolving global challenges. With heightened demand for insurance protection in a volatile environment, Swiss Re’s strategic insights and engagement with primary insurers play a pivotal role in addressing the needs of the industry and ensuring its long-term viability.

Speaking about the data, Urs Baertschi, Swiss Re’s CEO Property & Casualty Reinsurance, said: “Strong partnerships between insurers and reinsurers, improved underwriting data, and, to a degree, a rebalancing of the risk sharing between insurers and reinsurers will be necessary for a sustainable industry and to ensure reinsurance can fulfil its core function as a shock absorber of peak risk.”

Gianfranco Lot, Swiss Re’s Chief Underwriting Officer, Property & Casualty Reinsurance, explained: “For the industry it’s important that risks remain insurable. That’s why Swiss Re has been talking about climate change for so long and we have taken such a strong position on it. We continue to invest significantly in our own risk models and are ready to support and grow with our clients in the natural catastrophe business.”

Challenging casualty market

The casualty market finds itself at the centre of ongoing discussions due to a host of pressing issues. Escalating social and economic inflationary pressures are exerting upward pressure on claims costs, a matter of significant concern. A startling 42% surge in litigation funding from 2019 to 2022 highlights the escalating legal complexities. Swiss Re’s analysis further underscores this trend, revealing a 54% increase in the number of awards exceeding USD 5 million in US courts between 2014 and 2021. This phenomenon, primarily witnessed in the United States, is now exhibiting signs of emergence in other regions around the world.

Navigating this evolving landscape necessitates a deeper commitment to data transparency. Understanding the underlying exposure linked to emerging risks and effectively addressing forthcoming challenges hinges on a comprehensive understanding of evolving dynamics.

As the casualty market grapples with these multifaceted issues, stakeholders are compelled to explore innovative strategies and solutions to ensure resilience and adaptability in the face of an increasingly complex and litigious environment.

Growth beyond pure risk transfer

To grow and advance insurance offerings in the fast-changing market, the need for greater efficiency is becoming an increasingly relevant topic in the insurance industry. In this, data- and tech-driven solutions will play an important role.

Swiss Re’s Reinsurance Solutions division offers a broad range of tools and services spanning the entire insurance value chain, beyond pure risk transfer. These scalable solutions cater to specific needs and are designed to help insurers stay competitive as the industry continues to evolve rapidly.

Moses Ojeisekhoba, Swiss Re’s CEO Global Clients & Solutions, said: “Building on our risk knowledge and in-house digital capabilities, Swiss Re’s suite of solutions goes beyond our core function as a reinsurer. We help primary insurers better utilise data and analytics to simplify product offerings, reposition portfolios and improve overall performance, and ultimately position them for future growth.”

Source: Swiss Re