Reinsurers accept pricing, preferring to discuss growth

Discussions about pricing were unusually quiet in Monte Carlo and the same is true in Baden-Baden so far this year, suggesting that rates are becoming less of a focus in the renewals negotiations, Frank Reichelt, Swiss Re’s market executive Northern, Central, Eastern Europe, told Baden-Baden Today.

Pricing has been a major topic in recent years. During what has been an elongated soft market, reinsurers have been pushing for rate increases and describing the pricing levels as unsustainable.

While rates have reacted to some extent after the 2017 major hurricane losses, the correction was weaker than expected.

“Monte Carlo this year was very quiet around price developments. The reinsurers remained silent but also clients and brokers. We did not hear anyone starting a discussion over the topic,” Reichelt said.

And between Monte Carlo and Baden-Baden, he noted, there has been little noise around pricing. “In the last three years there have always been strong messages from all parties involved out there.”

Clients and brokers seem to have agreed that pricing levels are OK, he said. Reinsurers certainly don’t want to go further down and may have some doubt about the sustainability of the current price levels, but, overall, they find it acceptable.

“There is plenty of reinsurance capacity which exceeds the demand, and the balance between the two is where the rate level is currently,” Reichelt said. “We have to accept the market reality.”

Instead of discussing pricing, topics have broadened with clients along the whole value chain, discussing how to grow their businesses, Reichelt said. Discussions are focusing for example on cyber, self-driving cars, data analytics and closing the protection gap, he explained.

Swiss Re is investing in knowledge and data to help cedants target new growth opportunities and develop new products. The reinsurer sees this capability as a differentiating factor in its market approach.

“We will see an even sharper differentiation between capacity providers and knowledge providers,” Reichelt said. Capacity providers are likely to be in a more difficult position in the future as they are easier to replace when the only measurement is the price.

“That’s a tough place to be,” he noted.