SCOR vows to take a nuanced view on rate rises, assessing clients on a case-by-case basis
While stressing that rate increases are needed, SCOR will take a nuanced approach in how it applies any rises to clients. It will consider a book’s loss experience, current level of rates and whether a client is able to achieve rate increases on its own portfolio.
John Jenkins, P&C reinsurance treaty chief underwriting officer for the Americas at SCOR, said that he feels there is an almost unanimous understanding on the part of insurers, brokers and reinsurers that increases are needed. But he believes that to apply rate hikes indiscriminately across the board would be a mistake.
“We will probably draw a line in the sand on no more decreases, but whether rates on a treaty will remain flat or see big increases will depend on the nature of each client’s portfolio,” Jenkins said.
“We will talk to clients. If a client’s portfolio has performed well, has not been hit by losses and rates are adequate, we will not be seeking increases. That is a sure way to lose business.
“Instead, we will work with clients, dig into their portfolios and make the right decision for them.”
He added that he is looking forward to these negotiations with clients. “It has been a pretty dry conversation in the last few years but, while there is angst in the market, people are also energised. You earn your keep as an underwriting in this environment.”
The reaction of third party capital to the recent losses will also play an important role in determining the extent to which rates might rise, he said. But he thinks, especially given that this segment of the market has so much capital trapped in structures while claims are calculated, that these investors will be seeking healthy rate increases to compensate for it.
“They will want a better return than if they were just rolling the same capital over,” he said. “Their reaction will have an influence on rates, especially in catastrophe business.”
SCOR has enjoyed a steep growth trajectory in the US in recent years—around 20 percent a year in recent years. Its market share in the US on the P&C side is much lower than in most other parts of the world, so it has targeted the region and has enjoyed a good reception from cedants.
Jenkins said that SCOR’s aim is to become a top five player in the US market on the P&C side; it is currently around 11th. On the life side, it is number one. While its growth trajectory had dipped a little in 2017, he believes potential rate increases in the market will now help boost its growth prospects further.
“It has been a win-win for us and for cedants in the US. We have a very strong brand in the rest of the world and an A+ rating, and new clients will have no reinsurance recoverables with SCOR. That makes us an attractive proposition,” he said.
“Our growth had probably dipped into the single digits after a few very strong years but we expect that to accelerate again now.”
He said SCOR is targeting national insurers to work with. While the SCOR group has strong relationships with international insurers and its US arm has good penetration into regional or niche players, something of a gap exists in its US client base between these two extremes.
“We are identifying clients we want to work with and seeking growth in that way,” Jenkins concluded.
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