"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."
- Urs Baertschi, CEO of property & casualty reinsurance at Swiss Re
Swiss Re expects the non-life reinsurance market to grow above GDP, driven mainly by inflation and urbanisation. The last ten years for the market in USD shows nominal growth of approximately 5.4% p.a. which equates to 3% if adjusted for inflation.
After years of “weak performance and above-average natural catastrophe activity,” Swiss Re believes that the reinsurance market is reverting to a more sustainable level of risk-adjusting pricing. The reinsurer expects this trend to continue at the upcoming January 2024 renewals.
Looking at underwriting, Swiss Re is concerned about rising losses from natural catastrophes negatively impacting the property (re)insurance market. Risk profiles continue to evolve and insured losses in excess of USD 100bn p.a. are expected to recur while demand for natural catastrophe property reinsurance is likely to remain high.
Swiss Re believes an important discussion point will be the balance between reinsurance capacity and increasing demand. While insurers are best suited to absorb frequency and attritional losses, reinsurers are reverting to their core function, supporting insurers to recover from large loss events such as natural catastrophes. This trend towards a more sustainable balance in risk sharing is expected to continue.
Secondary catastrophes such as wildfires, floods and hail will also be an important discussion point as modelling remains challenging and the effects of climate change are becoming more evident. To achieve more predictable outcomes, Swiss Re believes greater data transparency and investment in predictive capabilities is essential to manage the evolving risk landscape.
The reinsurer identified the casualty market as another topic of relevance with social and economic inflationary pressures driving claims costs. Litigation funding grew by 42% from 2019 to 2022 and a Swiss Re analysis reveals that between 2014 and 2021, the number of awards over USD 5m in US courts grew by 54%. While this is predominately a US phenomenon, Swiss Re believes there are signs that this trend is emerging in other parts of the world.
To grow and advance insurance offerings in the fast-changing market, Swiss Re believes 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.
Commenting on these predictions, Urs Baertschi, CEO of property & casualty reinsurance at Swiss Re, has 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, chief underwriting officer of property & casualty reinsurance at Swiss Re, said:
"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."
Moses Ojeisekhoba, CEO of global clients & solutions at Swiss Re, added:
"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."