Swiss Re seeks competitive advantage by using R&D to support risk selection

Swiss Re plans to strengthen its research and development (R&D) capabilities to more efficiently identify and allocate capital into more attractive, growing risk pools, the company revealed at a Dec. 2 investors’ day briefing.

The R&D activities are further supported by the reinsurer’s creation of the Swiss Re Institute, which bring together existing initiatives and sustains research partnerships with external research partners.

This is part of Swiss Re’s strategic framework, which was introduced a year ago to help position the company to face significant short- and medium-term industry challenges.

“Risk pools will continue to expand based on rising GDP in the world's economies and demographic trends,” said Swiss Re.

“Insurance penetration levels are still low in many parts of the world, especially in high growth markets. Technology in particular will help to close protection gaps worldwide by providing better, more efficient and cheaper offerings.”

The focus on R&D and technology is aimed at giving Swiss Re a competitive advantage in this area and facilitate better client support.

In the past, this approach has enabled Swiss Re to generate higher margins, with premiums from treaty renewals in property/casualty reinsurance from transactions increasing 81 percent in 2016 year-to-date, compared to the same period in 2015.

Christian Mumenthaler, Swiss Re’s group CEO, said: "We acknowledge significant challenges in some of our markets but we remain optimistic for our industry in the long term. In the current environment, it is absolutely essential that we focus on what we do best: leverage our capability to price risk and allocate capital to those opportunities that are most attractive.

“In practice this means we will continue to focus on our disciplined underwriting approach and further cut our capacity in some property and casualty businesses. On the other hand, we will invest more in life and health businesses.

“By placing even stronger emphasis on serving as the knowledge partner to our clients and by investing in those risk pools with the most attractive returns, we will be able to set ourselves apart."

Through continued use of this framework, Swiss Re’s top priority is to meet its financial targets over the cycle and strengthen its long-term financial performance.