‘AI is table stakes’, the rest is discipline – Swiss Re draws the line

“We need to lean into it. It’s table stakes now.” 

Key points:
Balanced market; appetite intact
Casualty needs caution
Sufficient supply for demand

Those are the words of Urs Baertschi, chief executive officer, property & casualty reinsurance, Swiss Re. But he is not talking about rates or risk. Instead, he wants to put artificial intelligence (AI) front and centre of the conversation at the Rendez-Vous de Septembre this year – and that is because of the extent to which using it correctly can help carriers. Click here to watch the full video interview.

“The emergence of generative AI and agentic AI is clearly a breakthrough technology that will impact our industry – from insurance to reinsurance – whether on the underwriting side, in claims or across operations,” he told Monte Carlo Today. “It will transcend productivity; it will transcend data capture and analysis and change what goes into underwriting. And we as an industry will need to lean into this.” 

Baertschi’s point is not a flourish for the foyer, especially for a sector that is so dependent on data and how well it is used. “We’re fundamentally a data-driven industry, and agentic AI now lets us process far more data, much faster and better. We must be in this in a meaningful way,” he added. “The industry will adapt fairly quickly, though the full impact will take a few years to play out.”

Behind that future-facing message sits a clear stance on portfolio discipline, selective deployment, and the realities of trend risk – particularly in US casualty. Across the interview, Baertschi returned to three organising ideas: the market is balanced, casualty needs caution, and property cat remains a line where Swiss Re will support clients at the right levels.

Casualty ‘pruning’ and pressures

Swiss Re made waves at the mid-year renewal by cutting its US casualty book by 26.6%, following extensive remediation to prioritise margin over top-line growth. Insurance revenue fell year-on-year by 8% to $8.9 billion, largely due to “pruning actions taken in casualty”.

Baertschi said Swiss Re is now “happy” with its casualty portfolio. “We’re just executing what we said we would do. We’ve rebalanced our portfolio over the past few years, and we had an over-weight position, particularly in the US liability and motor space… and we’re happy with where we are right now.”

Asked if he thinks pricing is keeping pace with loss trend, he called it “one of the very big debates we’re having in our industry” with different views across the spectrum. His view: “In both insurance and reinsurance, the current rate environment is not keeping up with trend.  Loss costs have been going up over many years. It hasn't been the same across the entire spectrum, but particularly in the US around liability and motor, we worry it may still be insufficient. It will take time to really find out. We remain very cautious in this space.”

The caution reflects unresolved structural pressures in the US legal environment: social inflation, nuclear verdicts and the rapid spread of litigation funding. “If you see the amount of litigation activity that’s out there, that wasn’t expected when some of this business was priced,” he said. 

“The number of nuclear verdicts… the amount of litigation funding… It is leading to courts being clogged up. It’s like a taxation on society—over $4,000 per household in the US, and in some states it can be double.”

Class-action dynamics exist elsewhere, he acknowledged – “in the UK, the Netherlands and Australia, a little bit” – but the driver he described was “predominantly a feature of the US legal system… driven by this excess litigation activity that’s driven by litigation funding.”

Despite the noise, he pushed back on any talk of capacity withdrawing. “There still seems to be sufficient supply for the demand out there right now,” he said. Appetite varies by a carrier’s risk view and the balance between technical return and investment income “given the long-tail nature of this business,” but he did not see “a massive shift” in who is interested. 

Last year’s talk of “equilibrium”, he said, meant supply meeting demand – “that environment remains the case, including for liability.”

Property, and nat cat appetite

On the broader P&C dynamics, Baertschi’s diagnosis is calm and direct. “Overall, the market is reasonably efficient right now,” he said. “When you look at the amount of supply and demand, there’s enough supply out there to meet most of the risk areas,” he said. 

“From a capacity perspective, the market is able to absorb the losses throughout the value chain. You saw this even in the first quarter here, where we had  $40 billion of insured losses for the LA wildfires, and the risk sharing between the insurance and reinsurance industry is reasonably balanced at this point.”

As for the mid-year, the watchword was steadiness. “It is working reasonably well overall, not too many surprises,” Baertschi said. “There’s still quite a bit of discipline in the reinsurance market when it comes to terms and conditions and structures. Price always fluctuates a little bit… and we saw that come through earlier this year.” 

He expects the tone to be “reasonably similar” into year-end, albeit with a seasonal caveat: “We’re in the Atlantic hurricane season. Historically, about 80% of all nat cat losses come from the US. So we’ll have to see what develops over the rest of the year.”

On property-catastrophe specifically, he acknowledged some easing at the top of programmes. “The prices have come down a little bit… particularly in the excess layers in nat cat,” he said. “But that doesn’t mean the prices that are out there right now are not still good, and it is our view that they’re still adequate for the risks that the industry is taking on.” 

Appetite, he made clear, remains intact. “We continue to have an appetite for nat cat business. It’s an area that we have leaned into and supported our clients with meaningful capacity, and we continue to do that.

“We’ll have to see what the market brings us… but we would expect the general continuation of the current environment.”

Step back to the macro, Baertschi said: “The reinsurance industry is a derivative of the insurance industry, and the insurance industry generally grows with GDP.” A cooler economy could show up first in engineering, credit and surety – “such as the construction segment” – and in marine if trade slows. Even so, he argued, “insurance is here as a sort of a beacon of stability throughout economic uncertainty and throughout geopolitical uncertainty.

“Consistency, transparency and no surprises” – Swiss Re’s 1/1 strategy.

“We have seen this before. This is not new for us, and so we’re generally optimistic for the insurance industry overall, and therefore for the reinsurance industry as well.”

What to expect from Swiss Re at 1/1?

No grand edicts, just clarity on process. “All our conversations are really client by client,” Baertschi said. “So there’s no broad-based messages, other than it’s consistency, transparency and no surprises. That’s what we’re committing to, and we look forward to engaging in those dialogues.”

Urs Baertschi is the chief executive officer, property & casualty reinsurance at Swiss Re.

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