Risk landscape not getting easier but innovation is key, says Swiss Re Corporate Solutions

The risk landscape is intensifying, tough re/insurance renewals are on the way, and inflation is a major concern. But Swiss Re Corporate Solutions says it is looking to support risk managers with continued innovation and risk data services. Tony Dowding spoke with Fred Kleiterp, CEO EMEA Swiss Re Corporate Solutions, at this year’s Ferma conference. Tony Dowding (TD): Where is the market currently? Are prices moderating, generally? Fred Kleiterp (FK): We have had a couple of years behind us where rate increases were very steep, and in certain lines were extremely steep, but now pricing is moderating, so less extreme price increases are expected. In certain lines you could even see that things are becoming a little bit more relaxed in a way like financial lines for instance. But obviously we are living in a very complicated world and the risk landscape has intensified further, not necessarily with risks that are completely new to us but they are much more present and they're all coming at the same time. We see the effects of climate change, we had floods last year and droughts this year. I think that's one element that is changing the risk landscape and which needs to be modelled through and priced correctly going forward. We see the energy crisis and what that means for inflation and might mean for the macroeconomic outlook, and we still see the aftereffects of pandemic, with supply chain disruptions now further exacerbated by the war. So all that leads to a risk landscape that's not getting easier, it is getting more difficult and I think it is the job of the insurance companies together with the brokers and their customers to update their understanding of the risk landscape and make sure that risks are modelled correctly and that they are priced correctly. That is the challenge that the industry has. TD: Are the current models up to it at the moment? FK: Models need to be continuously updated. Models are always based on the best estimate of the future, based on the experiences of the past, and therefore you have to continuously update the models as and when you see that things are fundamentally or structurally changing. It is a continuous effort. TD: Is cyber still the big area of concern? FK: Cyber is still a big concern and is one of the areas where customers find it most difficult to find capacity. From a Swiss Re perspective, we do deploy capacity in cyber, both in reinsurance and corporate solutions, probably a modest level compared to some of our competitors, but we invest most of our resources and effort into R&D to really understand and model the risk appropriately which is what we think is critical to be able to continue to deploy capacity. TD: What is the feeling coming from the re/insurance market as to how renewals are likely to go? Does it have a big influence on the primary markets? FK: We see that the renewals are going to be harder than they've been in years and mostly driven by nat cat, and that will work its way through also to the primary insurance market. You see the impact of climate change and the actual effects in secondary perils and primary perils as well and that means that we just need to adequately reflect the risk as it stands today and that's true for the whole industry, for reinsurers, for the insurers and also for our customers. Clearly, the price of risk in general works its way through the re/insurance market but even if you don't buy re/insurance and if you carry a lot of a lot of risk net on your balance sheet, you need to calculate the price of risk adequately into your models. So the reinsurance market does have an impact of course on the primary insurance markets but it is around the price of risk in general – if you are a corporate customer and you decide to use your captive more or you decide to use your balance sheet more, you still need to make sure that the pricing of the risk that you carry is done adequately and the same is true for primary insurance companies and for reinsurers, so it's all one continuum. TD: And what about the impact of inflation on the insurance market? FK: Inflation obviously has a big effect especially on short tail lines, so if you now have property damage and business interruption then as a result of inflation, and also as a result of supply chain disruptions, the claims costs will go up both for property damage and for business interruption. That must be reflected in the 1/1 renewals, in how exposures are being reported or being calculated, and if that is done properly then the rates will follow automatically. That is a critical action that customers need to take together with their broking partners and insurance partners. But we also should realise that beyond that, the impact that inflation has on claims costs has an effect for instance on deductibles, or it compresses the layers because as claims costs go up the layers are exhausted earlier, so all that needs to be factored into upcoming renewals. TD: For Swiss Re Corporate Solutions, what are the areas that you are particularly focusing on? FK: We are not making big changes to our strategy. We made changes back in 2019 and I think the turnaround of Corporate Solutions has been completed and we feel very good about where we are and the strategic direction that we have taken. We're not making massive changes to that but we are continuously evolving, so for Europe specifically we are looking to become a bit stronger on the casualty lines of business. And we are continuing to innovate and build out what we call our differentiated propositions, the things we believe we can really make a difference for our customers and those include international programmes where we have seen real good progress, so this is an area where we will continue to develop. Another area is around innovative risk solutions or parametric solutions, captive fronting, captive reinsurance and structured captive reinsurance. This is an area where we have seen a lot of demand in the past few years because of the market conditions. And I think it’s structural, I don't think that's a cycle-related phenomenon. Corporate risk managers are looking to sort of rebalance the risk retention versus risk transfer strategies. We also strongly believe that tech and data is an important part of the future and we have launched our risk data services proposition where we empower corporate risk managers to leverage their own data in a way that they can really create transparency into their risk exposures today as well as in the future. This is where we make available to them our nat cat models as well as our climate change models so that they can look at how their exposures are expected to be affected over time by climate change.

Risk landscape not getting easier but innovation is key, says Swiss Re Corporate Solutions

Insurer looks to support clients with innovation and risk data services

Want to read this article?

Read Next

Tax changes to insurance premiums proposed by UN

India insurers free to change wording in corporate policies

Travelers sees rate hikes continue; Q1 profit up 15%

US D&O rates stabilise, retention rates fall: Report

Taiwan earthquake claims unlikely to cause capital event

Tax changes to insurance premiums proposed by UN

India insurers free to change wording in corporate policies

Travelers sees rate hikes continue; Q1 profit up 15%

US D&O rates stabilise, retention rates fall: Report

Taiwan earthquake claims unlikely to cause capital event

Want to read this article?

Read Next

Tax changes to insurance premiums proposed by UN

India insurers free to change wording in corporate policies

Travelers sees rate hikes continue; Q1 profit up 15%

US D&O rates stabilise, retention rates fall: Report

Taiwan earthquake claims unlikely to cause capital event

Related Articles