Partnering for industry resilience

Building sustainable relationships and partnerships is key to re/insurance business success and tackling societal risk.

In the 'State of the Reinsurance Property CAT' briefing, we highlight what we see as happening in the industry and what's needed to maintain a sustainable reinsurance catastrophe market that can help make the world resilient. One of the key components of this is strong partnerships between reinsurers and their clients and partners as Krysti Adamson, Swiss Re's Head US P&C Globals and Thomas Rauber, Key Account Manager at Swiss Re, explain.

KA:  There is certainly no shortage of heightened risk factors. It remains extremely important that we continue to build resilient balance sheets and strong capitalization, in order to bear the costs of capital across the value chain. To do this, we need to generate sustainable and sufficient earnings.

Building this industry resilience can enable us to continue to play a critical role of helping to absorb catastrophic losses from natural and man-made disasters, plus navigate a complex risk environment that is compounded by macroeconomic volatility. This resilience can also continue to attract investors and capital to foster growth and close the insurance protection gap that exists.

At Swiss Re, we are focused on building strong, sustainable partnerships with our clients by providing them with relevant risk transfer solutions, such as Property Cat protection; exchanging on evolving risk insights; and continuously exploring ways to help address key business objectives - such as portfolio optimization, client acquisition and capital flexibility.

TR: Reliability and predictability are key ingredients to strong partnerships. Clients need to know what to expect of us and the 'early signalling' when things change due to appetite, trends or capacity restrictions. We strived to give this predictability to clients at renewals and to be clear about what we needed to see. This way clients knew what capacity would be available, the structures and limits and where we could help them to take on risk leveraging our own balance sheet. As an observation, we really saw a difference between clients at the renewals. Where we could see transparency and understand a shared vision, we were able to support with capacity and ultimately grow the relationship. It's a two-way street though to ensure mutual success.

KA: We are currently seeing significant shifts and changes in risk. For example, Swiss Re analysis shows that between 2014 and 2021 the number of jury awards over USD 5 million in the US courts grew by 54%. Another example of this changing risk landscape is natural disasters. Our recent sigma publication highlights inflation-adjusted losses have grown 5-7% each year, with the average insured losses per year reaching USD 110 billion over the last six-year period. In 2022, the impact of inflation on claims was between 6-13% for commercial property alone.

To be future fit and ready to manage new and shifting risks, we need to work together across the re/insurance industry to harness and leverage data far more than we do today. The increased transparency of underwriting data we receive from our clients and from other sources will aid in both managing and pricing risk at appropriate return levels. This in turn, will help provide better support for overall economic stability and re/insurance industry resilience.

TR: A prime example of where more transparency can help avoid surprises is on 'secondary' natural disaster perils, such as convective storms, floods, wildfires and hailstorms. There is room to improve the collection and transmission of exposure data of sufficient granularity. As an industry we must afford these exposures the same discipline in terms of monitoring and sharing of exposure data and to model results as specifically as primary peril risks.

Up-to-date exposure data also matters especially in times of high inflation and labour supply shortages, which pushes up the costs of property rebuilds and reconstructions as well as increasing the time taken to make the repairs. Lumber, steel, and many other materials critical for construction projects have experienced skyrocketing increases in pricing.

The monthly Building Materials & Components Index in the UK revealed that the cost for all new work increased by 8.7% year-on-year in March 2023, with housing repair and maintenance rising by 7.5% and civil works rising by over 9%

Finally, risk assessment needs to be predictive so we can not only take advantage of historic loss data but also to add in new drivers of loss such as changing weather patterns. This will help to ensure a more accurate, forward-looking view from which to base underwriting decisions on.

TR: Along with our proximity to clients and partners, what truly sets us apart is our ability to deliver value beyond just risk capacity. We need to be better at articulating the value we deliver in a way that clients and partners can see the full potential and benefits of what we have to offer. Clients and partners are at the centre of our business, and we need to help them with risk transfer and risk insights and knowledge. We need to continue to provide these services as well as the tools and analytics that can help them at the front end of risk to be more successful.

KA: On top of this value delivery, we will continue to invest in building our client franchise. We attach great importance to engaging in regular, active dialogues with our clients. We seek to continue to learn from each other. In addition, we want our clients and partners to extract the full value of what we offer. Together, we can partner for resilience.