NEWS
Mid-year renewal offers glimpse of strategies of Big 4 reinsurers
All companies achieved higher average risk-adjusted premium rates.
While continued firming market conditions were evident at the mid-year renewal for all, the outcomes for the Big 4 European reinsurers—Munich Re, Swiss Re, Hannover Re and SCOR—did diverge, offering a glimpse into their different approaches, says a report by Litmus Analysis, an advisory firm specialising in ratings and credit risk.
The report, “Reinsurance Renewal Round-up Mid-year 2023”, examined the P&C treaty renewals of the Big 4. Some 40 percent of global P&C reinsurance premiums flow through these four companies, thus representing a bellwether for the market. The sector is dominated by business from North America and Asia-Pacific and nat cat business is an important feature.
The report notes that, while continued firming market conditions were evident, Munich Re and Swiss Re took a more cautious approach, with renewed premium volumes declining by 2 percent and 8 percent, respectively.
Munich Re principally attributed the decline in its renewed book to selective growth and portfolio optimisation, which included a reduction in casualty proportional premiums on treaties where pricing, terms and conditions were inadequate. Swiss Re pointed to targeted reductions in casualty business in the Americas.
In contrast, while SCOR and Hannover Re pointed to disciplined underwriting: they took advantage of favourable opportunities to grow their books at the mid-year renewal. SCOR reported a 7 percent increase in renewed premium volume overall, with growth in all regions other than Asia-Pacific (13 percent of its renewed book with premium volume down 9 percent). Hannover Re reported an overall increase of 13 percent with 3 percent attributed to new and restructured business and 10 percent to price and volume increases. Its premium growth was tempered by share reductions on some underperforming treaties in Asia.
“Aggregate premium rate increases slowed through 2023 to date.”
In aggregate, the four companies renewed some €12 billion ($10 billion) of gross treaty premiums at mid-year 2023, with growth of just 0.4 percent and an average risk-adjusted price increase of 5.2 percent. This compares to growth of 5 percent and an average price increase of 5.8 percent achieved at mid-year 2022. The change in renewed premium volume at mid-year 2023 ranged from a reduction of 8 percent for Swiss Re to growth of 13 percent reported by Hannover Re.
All companies achieved higher average risk-adjusted premium rates, ranging from 4.8 percent at Hannover Re to 9 percent for SCOR. Swiss Re reported a 21 percent average price increase, partly offset by 16 percent higher loss assumptions, giving a net price increase of 5 percent. Munich Re’s average risk-adjusted pricing was up 5.1 percent. Further price hardening for natural catastrophe business was noted by Munich Re, SCOR and Swiss Re as a driver of premium growth in this line.
Compared with 1/4 renewals, growth in renewed premium volume slowed at mid-year 2023 for the aggregated group as a whole and for all the constituent companies other than Hannover Re. For the group as a whole and for each company other than SCOR, growth at this renewal lagged that at mid-year 2022.
Aggregate premium rate increases slowed through 2023 to date, while the picture for the individual companies was more nuanced, with Munich Re and Swiss Re reporting higher increases at 1/4 before dropping back at 1/7. SCOR bucked the trend, reporting a stronger average price rise at mid-year than at 1/4.
For much of the last four years Munich Re’s reported price increases have been lower than those reported by the other companies, although this may be influenced by differences in the way this measure is calculated and reported by each company.
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