The news broke as the insurance industry gathered for the Rendez-Vous de Septembre in Monte Carlo, and the factors are expected to drive discussions around risk assessment and capital management as insurers seek to navigate an increasingly 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.”
Growing Demand for Property and Specialty Lines
With rising property values, urbanisation, and increasing repair costs driven by inflation, the demand for property re/insurance is expected to surge, particularly in regions prone to natural disasters. Swiss Re Institute reported that 2023 marked the fourth consecutive year of global insured losses from natural catastrophes exceeding $100 billion, with 2024 on track to follow, having already reached $60 billion in losses in the first half of the year.
Swiss Re also anticipates increased demand in engineering re/insurance, particularly in the construction and renewable energy sectors. To support the transition to green energy, Swiss Re launched a Centre of Competence for Renewable Energy in 2023, offering clients specialised products and expertise in managing renewable energy portfolios.
In addition, the cyber re/insurance market is expected to continue its growth trajectory due to the increasing frequency and sophistication of cyberattacks. Managing accumulation risk in this sector will be crucial for efficient capital allocation.
US Litigation Environment a Growing Conce
In the U.S., the rising trend of large liability claims is becoming a significant concern for the industry. Over the past decade, U.S. liability claims have grown faster than economic inflation, with an increasing number of court verdicts awarding more than $100 million in compensation. In 2023 alone, there were 27 such cases.
Swiss Re predicts that if this trend continues, claims growth will soon outweigh the benefits of higher interest rates in casualty lines, potentially leading to reduced capacity in the market within one to two years.
The Importance of Data and Risk Modelling
As the risk landscape evolves, insurers, corporates, and public sectors are looking to reinsurers for more than just risk capacity. Advanced modelling expertise and real-time data are critical to understanding and pricing risks adequately. In this context, Swiss Re emphasised the need for a continuous flow of accurate data across the insurance value chain to recalibrate models as risks such as extreme weather, jury awards in the U.S., and cyber threats intensify.
Beyond risk transfer, reinsurers are increasingly being called upon to provide insights and innovative solutions to help insurers manage risks more effectively, unlock new opportunities, and enhance performance. Structured reinsurance solutions that help manage volatility and improve capital efficiency will also be crucial in navigating the current economic uncertainty.
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.”
Source: Swiss Re
