Price for the risk, not the competition: VIG Re’s Stephan Wirz

Despite talk of “softening”, prices remain risk-adequate, and capacity will only move where data and the price for risks ceded justify it, says VIG Re’s chief business officer Stephan Wirz.

Key Points:
Industry aligned on disciplined underwriting
Capacity is where the price is risk-adequate
Long-term partnerships over quick deals

“The softening or rather case by case price recalibrations some people refer to is only relative to the historical highs around 2023,” Wirz told Baden-Baden Today. “Overall prices are still solid, and the industry consensus is clear that disciplined underwriting remains necessary.”

VIG Re is taking the same stance into renewals. “We’ll be very disciplined in underwriting,” he said. “We’ll honour clients who provide good transparency; accurate data means an accurate price. Capacity is available; we can deploy even more capacity, but only where the price is risk adequate.”

Risk-adequate pricing a necessity

The term “risk-adequate” threads through Wirz’s thinking on nearly every issue, from client relations to the capital cycle. “To have risk-adequate prices is a necessity on all fronts,” he explained. “It’s not just a reinsurance issue. Primary insurers and their customers also need to understand the value of risk transfer and be prepared to pay an appropriate price.”

He warned that when coverage is underpriced, society ultimately bears the cost. “If you have limits for flood protection in, for example, Slovenia or Austria somewhere around €3,000 to €8,000, that’s simply not sufficient to provide a meaningful protection for owners of residential homes,” he said. “The same applies to reinsurance. We can only provide meaningful cover if everyone along the value chain understands the true cost of risk and is willing to provide sufficient risk protection for a risk adequate price .”

“We can deploy more capacity, but only where the price is risk adequate.”

That realism also extends to the capital market. Wirz said new money hasn’t piled into the sector because a decade of sub-par returns dented investor confidence. Two good years (2023–24) aren’t yet a long enough track record to reverse that. “Investors are not convinced that we as an industry can deliver the required or the expected returns on equity,” he argued. 

Wirz also pushed back on the “abundant” narrative of capacity. He said, “traditional capacity hasn’t changed dramatically, maybe around 22% more since 2015, about 2.2% per year.”

“Alternative capital has grown a bit more, through collateralised reinsurance and cat bonds, but not in infinite amounts,” he added.

That measured reality is reflected in the discussions taking shape in Baden-Baden. “Baden-Baden is closer to the renewal, so we’re already talking concrete treaty details, capacity, pricing, scope of cover, exclusions. In some markets, like Germany, discussions are well under way; in others, like Central Eastern Europe, not a single submission has arrived yet.”

The differing pace across markets highlights differing stages of readiness, but Wirz doesn’t foresee dramatic changes in structure largely anywhere. “Most programmes are adequate for the risks we’re taking. There’s sufficient retention and skin in the game from the primary insurers. We want to protect balance sheets, not annual earnings.”

For VIG Re, focus on pricing at a technical level with “mutual transparency” with partners remains of the utmost importance. “We write business we have a solid understanding of; this is not something that happens overnight. Renewal is the pinnacle of year-long dialogue,” Wirz said.

“We’re focused on long-term relationships and finding solutions, not just closing transactions,” he added. “Clients are not only interested in getting a great deal this year, they’re interested in a sustainable partnership.”

That shared mindset, Wirz believes, extends across much of the industry. “There’s good alignment between reinsurers – all pointing in the same direction of discipline,” he noted. “Of course, it’s the nature of the business that this will always be discussed, but we’ve learned the importance of sustainable business over quick deals.”

‘Everybody needs to make money’

Ultimately, Wirz’s message heading into Baden-Baden is pragmatic rather than cautious. “Let’s not fool ourselves – everybody needs to make money. Primary insurers, reinsurers, and brokers alike,” he said. “To achieve that in today’s world of geopolitical, economic and climate uncertainties, we need disciplined underwriting.”

He points to a widening landscape of conflict, macroeconomic volatility and evolving climate patterns. “With so many uncertainties, it becomes harder to make adequate returns on investment,” he said. “That makes underwriting profits even more important.”

Looking ahead, Wirz believes the industry’s resilience will rest on collaboration and relevance. “We can’t solve every uncertainty, but we can work together to stay relevant,” he said. “That means offering stable, meaningful products and services. Even in mature markets such as Italy, earthquake insurance penetration for residential homes is only around 6%. Closing such protection gaps is part of making society more resilient.”

Stephan Wirz is the chief business officer and member of the management board at VIG Re. He can be contacted at: info@vig-re.com.

For more news from Baden-Baden Today, click here.

Did you get value from this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.