Swiss Re warns early renewal talks snagging on retentions

A decade’s worth of flat retentions may be a key sticking point in early talks ahead of the 1.1 reinsurance renewals, officials at  Swiss Re indicated in a briefing for journalists ahead of next week’s reinsurance conference in Baden-Baden.

“Retentions is probably one of the harder conversations we are having,” Nikhil da Victoria Lobo, Swiss Re’s head of western and southern Europe, told reporters.

Swiss Re pushed the point, calling out its assembled leaders from across regions and business lines to argue that cedents abandon long-standing attachment points.

“Many of the retentions have stayed where they currently are for a long, long time and we should look not just at where they are this year,” Swiss Re’s head of property for EMEA Beat Kramer Mölbert said.

The dual pressures of inflation and rising loss trends, especially on wildcard secondary perils, should put paid to static retentions, Mölbert said.

Retentions “need to be up with inflation and then some for increasing loss trends,” he said of secondary perils. Inflation and rising risk levels “have a very similar impact on where retentions need to be.”

Excess-of-loss deals are highly vulnerable, not just the proportional deals that catch direct impact of rising underlying replacement costs, he noted.  Inflation can hike value of XoL exposures far in excess of the rate of inflation when the lower boundary of towers is stagnant.

But Frank Reichert, the head of northern, central & eastern Europe, added that early talks have been encouraging in their tone.

“I think there is a common understanding as a starting point in all our discussions” that the past several years of market changes, focused on new risk assessments and inflation, are “game-changing,” Reichert said.

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