The COVID-19 pandemic, from its beginnings at the end of 2019 until the point at which it reached endemic status earlier this year, upended almost everything about normal life. People moved their work from the office to home, economies nearly buckled under the weight of a slowdown in consumer spending, and governments tried to balance handling a pandemic and the effects of their responses to it.

The re/insurance sector took body blows from the effect of lockdowns around the world, having now to factor in what a resurgence of the virus or a new, more-dangerous, variant might mean. And all this was before the first land war in Europe in nearly 30 years, when Russia invaded the sovereign state of Ukraine in February 2022.

For Thierry Léger, group chief underwriting officer at Swiss Re, the stresses and strains of the last few years began much further back than 2019. For him, the current pressures on the market began around five years ago.

“If you go back five years, reinsurance had been through a difficult time even before COVID-19 hit. They were tough years with big events and large losses that were difficult for reinsurers. That’s where we were when the pandemic hit,” he explained.

“That was significant with larges losses in the life and health space, and also P&C. Then we had war in Ukraine, which brought turbulence and uncertainty to the market. We have entered a world that is unprecedented in volatility and uncertainty and is also super connected—what touches on one thing impacts on another.”

This, said Léger, has shifted attitudes to risk. There is less of an appetite for it in late 2022 than before in some places, while it has increased in others at the same time.

“It is a very differentiated environment that needs excellent data models and underwriting judgement for the industry to navigate its way through.

“Our appetite at Swiss Re has changed as a result of the losses but also because of everything that has happened. I would summarise our appetite as actually remaining very large—we are in the risk business. Imagine a world that is riskier than it was before that is also having reinsurers pulling back. That’s an environment that should offer not only challenges but also opportunities.”

He added: “Yes, we have been tightening our terms and clarifying risk appetites in many ways, and prices have been increasing. But we’re trying to make our balance sheet available to as many clients and as many risks as we can. And we still need a diversified portfolio.”

What is ahead?

Given that so much in recent years has been unpredictable, it seems risky to even guess at what the rest of 2022, along with 2023, can bring. Léger pointed out five things that he thinks are likely to impact the market in the near future: climate change, inflation, the war against Ukraine, supply chain disruption, and cyber.

The most pressing of those, said Léger, is climate change. “It’s terrible. There are so many different headlines about it that I am concerned we’re forgetting that it’s the biggest threat to humanity. And it’s impacting us in different ways. It’s increasing exposures while at the same time forcing us to help the world reduce its carbon dioxide emissions,” he said.

On cyber, Léger lumped it together with climate change. “The two risks have been with us for years at this point. We’ve seen over the last few years, for the first time, that the demand has been outstripping what is on offer. That’s what you see in cyber, which has had losses and combined ratios above 100.

“There are multiple challenges in a world that’s become increasingly digitised. There’s a massive opportunity when it comes to cyber, but the industry is being challenged to find the capacity to deal with that line of business,” he said.

Léger highlighted that the most direct impact of climate change was on the appetite for natural catastrophe business. “Analysts are questioning the ability of the industry to keep up with the changes that are being induced by climate change. Investors are increasingly hesitating to put capital to work in this space.

“The same is true for some of our competitors. I have rarely seen a line of business so directly impacted,” he explained. However, he added, Swiss Re feels confident to tackle this opportunity.

Léger concluded saying that inflation comes in four ways: economic, wage, medical, and social. “This is going to be the second very big thing that impacts the industry,” he said.

Thierry Léger is the group chief underwriting officer of Swiss Re.