Swiss Re’s CEO Andreas Berger said the reinsurance company is focused on amplifying the core of its business to deepen its relevance, citing leverage from alternative capital, a need to reimagine the value-chain, the role of artificial intelligence and the importance of disciplined cycle management at this time.
One of the first areas to be highlighted was the firm’s business unit that focuses on third-party reinsurance capital management and insurance-linked securities (ILS) strategies for investors.
Berger said, “We will use the full strength of the group, including our transversal value propositions such as Alternative Capital Partners and the Public Sector Solutions team to create real leverage across the portfolio and deepen our relevance with clients and brokers.”
It feels like an increasing number of major re/insurers are acknowledging the power of alternative and ILS capital in supplying a lever for the traditional balance-sheet, enabling companies to be nimble through partnerships with major institutional investors, leaning on third-party capital by sharing the risks and returns of their underwriting.
The Swiss Re CEO also hinted at a desire to see perhaps more meaningful change in how risk and capital flow along the reinsurance market chain.
He explained, “We will advance the reinsurance and insurance industry. Because amplifying our core is not enough on its own. We also need to reimagine the value-chain overall.
“We will use AI to enhance and support decisions, simplify processes and scale expertise.
“We will also seek to leverage our proprietary data and research, turning it into sharper insights and more targeted solutions for clients and brokers, but also for ourselves.”
The quality of its people are seen as equally important, with the Swiss Re CEO adding that, “We will achieve more together, because none of this happens without the right people and the right culture. We will attract and develop future-ready talent with the intellect, execution and vision to deliver on our technical and AI ambitions, and we will foster a culture that drives commercial results substantially and sustainably, but importantly also responsibly.”
All of which perhaps suggests that Swiss Re is staying open as to how the reinsurance market may transform over time through the use of efficient capital, responsive risk transfer techniques, and adoption of advanced technologies.
That reallocation needs re/insurers and other market participants to be ready, to ensure they can capture opportunities and retain and grow business volumes, while it and AI in general have the potential to shake-up the market value-chain over time, perhaps adjusting how economic value gets distributed to players across the market-landscape.
Swiss Re’s CEO also commented on reinsurance market conditions and the importance of cycle management today.
Berger said, “Let me state there is not one cycle. So it’s very important to say, because each line of business is in a different market cycle, there might be a few lines that are correlated to each other, but not in general.
“So for the renewals, we have seen demand, but we have seen also higher competition on the supply side. There’s abundant capital in the market, and that is reflected in more intense pricing competition.
“The good news is that the structures stayed broadly intact, the terms and conditions and attachment points, and that’s something we need to observe, and we need to keep that discipline in the market.”
Berger also highlighted that some large, sophisticated reinsurance buyers have been taking more risk, so effectively keeping premium out of the market to a degree.
“But, the good news is they need lead reinsurance partners, so our share of wallet in the market didn’t reduce,” he explained.
The CEO also commented on the influence of ILS capital at the renewals, saying, “We see trends of alternative capital coming into the reinsurance space. We have seen so far, in the transactions, they all in their nature were very bespoke. Something we’re observing.
“Swiss Re is always known to be very active in the intersection between the liability and the asset side, but also capital market side. So again, we were one of the founders of the ILS market.”
He added, “This is normal cycle management. There are parts of the cycle when rates go up, and then parts of the cycle when, due to the high rates, investors think there’s an attractive market, so capital will come in, and it puts more pressure on pricing, competition goes up.”
Closing by saying, “Here technical excellence, technical underwriting, how do you assess risk, how do you price risk, is very important.
“You always have to look at rate adequacy, about the composition of your portfolios and protecting your balance sheet.”
Also read: Swiss Re reports strong profits, stable renewals, reduces external nat cat retro.
