Swiss Re Corporate Solutions recovery on track for sub-97% combined ratio

Efforts to improve the profitability of Swiss Re’s Corporate Solutions business are paying off, with the corporate insurer on track to achieve its 2021 combined ratio target, according to the unit’s chief executive. Speaking at a media event, CEO Andreas Berger said Corporate Solutions’ first-quarter results were “encouraging”. The unit produced a combined ratio of 96% in Q1, despite Covid-19 and higher-than-expected natural catastrophe losses. Mr Berger said he is confident Corporate Solutions will achieve a full-year combined ratio of less than 97%, a new target announced during end of year results and lower than an initial 98% goal. A relative newcomer to the primary corporate insurance market, Swiss Re Corporate Solutions has posted big losses in recent years. It recorded a combined net loss of almost $1bn for 2020 and 2019. In the first quarter of 2021 however, Corporate Solutions posted net income of $96m, compared with a net loss of $166m in the prior-year period. Mr Berger, who joined Swiss Re in March 2019 from rival Allianz, admitted the Zurich-based group had made mistakes by expanding into a softening market. Swiss Re grew its direct corporate insurance business at a time of falling premium rates. “We were opening offices all over the place… we believed we could make a difference,” he said. However, Swiss Re Corporate Solutions expanded into US casualty, a line of business where it had “no presence” and “no expertise”, Mr Berger added. As a result, the firm “underpriced” in a “toxic” US casualty market, he said. Swiss Re reviewed its corporate business in 2019 and had since “significantly pruned its book”, exiting areas where it “underperformed” or where it was “sub-scale”, Mr Berger said during the briefing. He went on to explain that rising insurance rates in the hard market are leading to a renewed focus on risk management among clients. During the almost 20-year-long soft market, where rates were extremely low, customers were not “incentivised” to manage risks, he said. The combination of rising rates and the “shock” of Covid-19 has seen corporates “look again to control their risks”, he added. According to Swiss Re’s chief executive officer Christian Mumenthaler, the insurance and reinsurance industry is undergoing a transformation, with reduced emphasis on “capital”, in favour of knowledge and service. “Capital has become plentiful and its value has reduced,” he said during the media briefing. With the “long-term devaluation of capital”, there is a shift to “knowledge, relationships and solutions”, he added. One third of Swiss Re’s clients now purchase additional non-risk transfer services. Moses Ojeisekhoba, Swiss Re’s chief executive for reinsurance, was also on the briefing and told the audience that the three drivers of reinsurance economics – expenses/cost of capital, claims and investment returns – are changing the way they interact and influence the market. Mr Ojeisekhoba expects interest rates to remain low, which forces insurers to focus on underwriting to generate returns, a trend that will continue, he said. Although Mr Ojeisekhoba said it is too early to give details of the June/July reinsurance renewals, he explained they were moving along the same lines as those in January and April. Commentating on rate increases for cyber insurance, Mr Ojeisekhoba suggested pricing was not keeping pace with rising exposures. “[Cyber] rates have increased for a reason, and I would expect ransomware will continue to increase. The question is whether rates are adequate to keep up with exposure. Ultimately, prices need to adjust for relative exposure,” he said. Ransomware exposures are higher now than was priced for in the fourth quarter of 2020 and first quarter of 2021, he added. Mr Berger suggested that increased use of data analytics could see a move away from annual renewals and insurance contracts. He said the increasing use of real-time data and predictive analytics would see insurers “embed” insurance with other services. For example, Swiss Re Corporate Solutions and Hitachi Europe use machine-maintenance data to offer predictive maintenance software to manufacturers and transport companies, backed by insurance. “I can imagine we will not depend on an annual policy or renewal. It’s a slow trend but I can see it coming,” he said.

Swiss Re Corporate Solutions recovery on track for sub-97% combined ratio

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