How can re/insurers make sense of a rapidly changing world?
The COVID-19 pandemic, from its beginnings at the end of 2019 until the point at which it reached endemic status earlier this year, upended almost everything about normal life. People moved their work from the office to home, economies nearly buckled under the weight of a slowdown in consumer spending, and governments tried to balance handling a pandemic and the effects of their responses to it.
The re/insurance sector took body blows from the effect of lockdowns around the world, having now to factor in what a resurgence of the virus or a new, more-dangerous, variant might mean. And all this was before the first land war in Europe in nearly 30 years, when Russia invaded the sovereign state of Ukraine in February 2022.
For Thierry Léger (pictured), group chief underwriting officer at Swiss Re, the stresses and strains of the last few years began much further back than 2019. For him, the current pressures on the market began around five years ago.
“If you go back five years, reinsurance had been through a difficult time even before COVID-19 hit. They were tough years with big events and large losses that were difficult for reinsurers. That’s where we were when the pandemic hit,” he explained.
“That was significant with larges losses in the life and health space, and also P&C. Then we had war in Ukraine, which brought turbulence and uncertainty to the market. We have entered a world that is unprecedented in volatility and uncertainty and is also super connected—what touches on one thing impacts on another.”
This, said Léger, has shifted attitudes to risk. There is less of an appetite for it in late 2022 than before in some places, while it has increased in others at the same time.
“It is a very differentiated environment that needs excellent data models and underwriting judgement for the industry to navigate its way through.
“Our appetite at Swiss Re has changed as a result of the losses but also because of everything that has happened. I would summarise our appetite as actually remaining very large—we are in the risk business. Imagine a world that is riskier than it was before that is also having reinsurers pulling back. That’s an environment that should offer not only challenges but also opportunities.”
He added: “Yes, we have been tightening our terms and clarifying risk appetites in many ways, and prices have been increasing. But we’re trying to make our balance sheet available to as many clients and as many risks as we can. And we still need a diversified portfolio.”
