Following rate improvements in many markets, and particularly in loss-affected segments, Swiss Re expects further rate hardening across all lines of business. At the same time, the reliance on underwriting profits increases in the low interest rate environment.
Swiss Re also expects more opportunities for (re)insurers due to a combination of improving insurance demand and growing exposures.
Despite the cancellation of the Rendez-Vous de Septembre 2020 in Monte Carlo, Swiss Re shared its view on the upcoming renewals season in a virtual format.
Swiss Re expects prices to continue to increase driven by the combination of lower interest rates and the need for prices to cover increasing loss trends as demonstrated by recent experience across the world.
Hurricanes are frequently affecting areas where exposures have grown as a result of wealth accumulation. This leads to increasingly severe losses, as demonstrated in the past few years. This year is forming up to be no better. The current Atlantic hurricane season is the first on record to see nine tropical storms forming before August and 13 before September. The situation is further aggravated by the higher frequency and severity of secondary perils, such as floods and wildfires, leading to rising claims and highlighting the need for insurance protection.
While low interest rates have been affecting the industry’s profitability since the global financial crisis, further rate cuts aimed at fighting the economic impact of COVID-19 will only exacerbate this problem.
Swiss Re CEO reinsurance Moses Ojeisekhoba said, “Even before the COVID-19 crisis, most major markets were operating at below-average profitability. To be able to address the growing need for insurance protection in a sustainable way, further price increases across all lines of business are clearly needed.“
Importance of underwriting discipline
Against the background of ensuring pricing adequacy, underwriting fundamentals such as risk selection and costing, portfolio steering, appropriate terms and conditions, and contract wordings will be critical to writing future business.
A move to a more scientific, technology-driven approach will continue to strengthen underwriting. Advanced data analytics are already available to enable real-time views, market awareness, portfolio analytics and dynamic feedback loops to improve risk selection.
Swiss Re is making use of advanced technology to lead the way in underwriting. This includes enriching client exposure information with geospatial data to improve both the accuracy and speed of risk and loss assessments.
In contracts, natural language processing complements human contract reviews, which helps to flag favourable versus potentially problematic clauses and generate new wording insights.
Swiss Re group chief underwriting officer Thierry Leger said, “At Swiss Re, we have accelerated digitisation and the use of more and better data sources across the entire underwriting process. With these capabilities and the risk insights from Swiss Re Institute, we can improve our own decision-making and effectively support our clients in their underwriting.”
Outlook
Overall, Swiss Re expects the non-life insurance market to continue to grow, driven primarily by exposure growth. Swiss Re Institute forecasts a global growth rate of 3.3% in real terms for 2021. Other factors driving demand are the awareness, triggered by COVID-19, of the danger of being uninsured and the increasing frequency of weather-related events. M