INTERVIEW: MOSES OJEISEKHOBA, SWISS RE
Preparing for economic turbulence
The last three years have seen multiple economic shocks. Swiss Re’s CEO for reinsurance Moses Ojeisekhoba spoke to Monte Carlo Today about how the reinsurer assesses the unforeseeable.
The last three years have seen multiple economic shocks from the COVID-19 pandemic to supply chain issues, from inflation to the first European war in decades. The world’s economy is under strain in 2022 with potential recessions predicted in major economies. But all these things prove how a reinsurer’s job is to assess the unforeseeable.
That is according to Swiss Re’s Moses Ojeisekhoba, chief executive officer, reinsurance, who spoke to Monte Carlo Today about all these issues as well as the talking point that will be top of the agenda at this year’s Rendez-Vous: the hard (or hardening) market. Though a common term, it is not one that Ojeisekhoba likes.
“I don’t like the terms ‘hard’ or ‘hardening’ market,” he said. “I tend to think about the risk itself and what we need to do to ensure that we attach the right premium to that exposure or the risks that are being taken by the overall industry.”
Ojeisekhoba pointed to a time four or five years ago when there was far more exposure in North American commercial auto than the premiums being charged. This, he said, led to a point when insurers had to make adjustments that ensured the premiums charged reflected the exposure. That exposure was itself being driven by a combination of the frequency and severity of losses.
“You’ve seen that trend carry on into the shorter-tail lines, specialty lines, property. As we entered 2021/2022, there’s been a need for rate increases, driven by the greater incidence of climate change and especially around secondary perils, that match up with the exposure. We’ve seen that translate into the reinsurance market.
“As we entered 2021/2022, there’s been a need for rate increases.”
Moses Ojeisekhoba, Swiss Re
“That’s all exacerbated by the inflationary pressure and other macroeconomic factors such as supply chain issues and the geopolitical fallout from the war in Ukraine,” Ojeisekhoba explained.
Another factor dominating conversation in recent weeks has been the scale of P&C losses in the first half of 2022. The sense of that period, Ojeisekhoba admitted, is that it has been “turbulent”.
“The net income comes from a combination of technical results alongside investment results. It’s clearly been turbulent in the first half of the year from a financial market standpoint. In terms of how assets have performed, there has been a significant drop,” he said.
Risks on the horizon
Looking ahead, Swiss Re is trying to assess the impact of future big losses.
“It comes back to risk. The shape of risk has clearly changed, driven by macro and geopolitical factors, climate change, concerns around the supply chain, along with issues such as strikes, riots, and civil unrest, which are things that you worry about because of food shortages around the world. These are all factors that are increasing risk today,” Ojeisekhoba said.
Climate change is a continual issue, always on the discussion board. There was an unprecedented heatwave in Europe over the summer that was so severe that emergency meetings were held within the UK government as to how to deal with the fallout. Rather than preventing climate change, the conversation in 2022 is moving to how people can adjust to its effects.
“The most important component around climate change is understanding it sufficiently.”
“This is why insureds come to insurance companies and why those companies come to the reinsurers. But the most important component around climate change is understanding it sufficiently. At Swiss Re, we spend a significant amount of money trying to do that.
“We have our own proprietary models, a cat modelling team that runs to about 50 people, and scientists within that team from every discipline. They’re all trying to make sure that we have a good sense of the exposure and understand it not just by looking backwards. That is what people tend to do, but we’re trying to get a sense of what the major changes are, looking ahead,” he said.
Perhaps more pressing than climate may be the prospect of a recession hitting economies still battered from the fallout of the COVID-19 pandemic. In recent months multiple central banks and governments around the world have brought in measures to try to cool rampant inflation.
“If you don’t bring it down inflation creates massive issues in the broader economy. That’s why everyone feels the chances for recession are much higher than they were,” Ojeisekhoba said.
“At Swiss Re, we prepare ourselves by looking at both sides of the balance sheet—the assets and the liabilities—for these eventualities. We look at the probabilities of a downside and which instruments we choose to buy and what to hedge.
“But at the same time, we want to make sure we are there for our clients in terms of the risks they have and that we’re able to help them continue providing the right coverage,” he concluded.
Moses Ojeisekhoba is the chief executive officer reinsurance of Swiss Re.
Main image: Shutterstock / Christophe Testi
