Bertrand Labilloy, CEO of CCR, chairman & CEO of CCR Re
14 September 2021Insurance

A public-private partnership: CCR leverages CCR Re to build expertise

Caisse Centrale de Reassurance (CCR) is France’s state-owned reinsurer for natural catastrophes and, more recently, terrorism risks. Created post-World War 2, it’s now 75 years old and is among the 25 largest re/insurance organisations in the world. Its subsidiary,  CCR Re, was launched in 2017 to carry on writing reinsurance on the open market but separately from the public business.

Both have enjoyed significant success. In 2020, despite COVID-19 losses, S&P Global Ratings affirmed its ‘AA’ long-term insurer financial strength and issuer credit ratings on CCR in France and raised its ratings on CCR Re to ‘A’ from ‘A-’.

More recently, CCR Re’s half-year figures showed continued growth: gross premiums of €665 million ($789 million) were up 14 percent. Underwriting profitability for the six months to June 2021 was also unaffected by the consequences of claims covered in 2020.

“We had no loss creep during the first half regarding the huge claims of 2020, including claims in relation to the COVID-19 crisis,” explained Bertrand Labilloy, chief executive officer of CCR and chairman and CEO of CCR Re.

Despite the success, however, change is coming. Intelligent Insurer’s Re/insurance Lounge caught up with Labilloy to discuss the businesses, CCR Re’s strategic plan “Horizon 2025”, launched earlier this year, and the state of the market.

“We’ve experienced quite high growth, but we will be very selective and we are not chasing premiums.” Bertrand Labilloy, CCR/CCR Re

Rates must harden

Starting with the state of the market, Labilloy was unequivocal that rates must harden. First, recent events have made it impossible to ignore climate change. “The short-term and local approaches are no longer valid,” he insisted.

“In previous years, cedants in Europe told us that since they had encountered a good claim experience, there was no reason to increase property tariffs, and we shouldn’t take into account the large disasters that occurred in Asia or the Americas.”

That no longer applies, he said. “There is a global and long-term trend that everybody calls climate change. Maybe we should call it ‘climate disruption’ or the ‘cat climate revolution’ but, clearly, it’s global. No market can pretend that it can escape from this.”

That alone would argue for pushing up rates. In addition, it is combined with massive levels of fiscal debt and deficits across the world that will continue to subdue interest rates for years to come. Together, that means rates being pushed up on property and casualty (P&C).

“There is also more work to be done on the contractual terms, to ensure that they are more precise and more relevant,” Labilloy added.

That should support continued profitability for CCR Re, as well as growth. Its most recent results showed the reinsurer “back on track” after losses in 2020: a combined ratio of 97 percent, a life margin rate of 5 percent and a solvency ratio of 200 percent.

“We’ve experienced quite high growth, but we will be very selective and we are not chasing premiums,” he said.

At the start of the year, CCR Re launched the third vintage of its sidecar 157 Re with Boussard & Gavaudan Investment Management.

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“We need to invest money where the risk is higher and when the return in terms of loss prevention is higher.”

Risk prevention to the fore

Continuing to grow CCR Re is one of three key pillars in CCR’s strategic plan, launched in June 2021. It’s key to helping attract the best talent that can support its other ambitions.

“By definition, the activity of the public insurance business will grow at the same pace as the French P&C market, which has been 2 percent annually for years, so it’s not very dynamic. If you want to modernise a company, it’s better to have higher growth to be in the position to attract very skilled people,” Labilloy said.

Such people will be important in supporting the other two pillars of the plan. The first is enhancing CCR Re’s expertise in risk modelling. Several areas, in particular, stand out as requiring new insights.

One is cyber risk which, according to Labilloy, is better viewed as a mix of risks—part very technical and part (potentially) involving some terrorism aspects.

“The first part of the risk is very insurable. The other part is probably systemic, so we have to work closely with the government to see how we could tackle that risk and build a consistent and sustainable platform to cover it.”

Another area that requires new insights—and one that was strongly highlighted by the COVID-19 crisis—is non-damage business interruption cover.

“It’s an area that caused big problems in 2020, and we have to analyse in depth what we can do to fill the protection gap in this area,” he said. “It’s very important for the government because it’s a problem for the continuity of economic activity. We suffered a pandemic, but business interruption can occur with other types of risks.”

The final pillar is a desire to play a greater role not only in covering losses but also in preventing them. That will be achieved partly by working with insurers, according to Labilloy.

“As a public reinsurer, we can help our cedants adopt the right measures and incentives for their clients to reduce their exposure to natural disasters,” he said.

It also means working with governments and applying that expertise in modelling and risk to public action for the mitigation of catastrophes.#

“In the past, prevention measures implemented by local authorities—and even by the government—did not correspond very well to the real exposure to natural disasters. There was no clear link.

“Investment was inefficient and didn’t go where it should. We need to invest money where the risk is higher and when the return in terms of loss prevention is higher,” concluded Labilloy.

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