SCOR seeks higher rates, retentions as nat cat losses erode APAC profit targets
An elongated soft market and increased catastrophe losses driven by climate change means SCOR has to work hard to meet profitability targets.
SCOR is meeting its top line growth plans in Asia-Pacific, but a combination of an elongated soft market and increased catastrophe losses driven by climate change means it has to work hard to meet profitability targets, Mukul Kishore, chief executive officer for the Asia-Pacific region at the reinsurer, told SIRC Today.
Kishore pointed to a couple of reasons behind what he called a “performance blip”. These included a higher frequency of cat events and SCOR’s exposure to them, and a soft market that has spanned the past 15 years, which has meant covers have widened yet prices have gone down.
“Even the frequency losses have been transferred to reinsurance,” he said. “This probably is affecting us more than anything else. If I were to look at the last five or six years, compared to a much longer period before that, we are looking at a new normal, which is affected by climate change.
“You have increased frequency and a higher severity of these natural catastrophe events driven by climate change.”
He said that no region of Asia is immune to climate change in terms of losses. Many different parts of the region have been hit by significant and often record-breaking events, such as the significant flooding in Australia this year.
“We have had wind events, the tropical cyclones in Japan in 2018 and 2019. Just this year we have had Typhoon Nanmadol, in Japan, Malaysian floods, and floods in South Africa, which we picked up as a reinsurer in Asia.”
Mature and emerging markets in Asia-Pacific have both been hit by losses, he said. However, the results in some of Asia-Pacific’s fast-growth markets, such as India and South Asia, have been more stable because there hasn’t been a very large cat event there.
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Many reinsurers ‘still firming up’ their 1/1 strategies: Aon
Hurricane Ian is making an already complex market even harder, but capacity will be available in Asia-Pacific—at the right price.
The industry usually gets a keen sense of the underlying dynamics around the year-end 1/1 renewal at the SIRC conference. But this year “many reinsurers are still firming up their strategies” pointing to some late negotiations this year, George Attard, chief executive officer, Reinsurance Solutions, Asia Pacific, Aon, told SIRC Today.
He blames Hurricane Ian for making an already complex market even harder. But he is also confident capacity will be available in Asia-Pacific—at the right price.
“Coming out of this year’s Monte Carlo Rendez-Vous, the sense was the US would be a hardening to hard market; the rest of the world would be focused on available capacity, but dependent on pricing and structure. Then Hurricane Ian came along and created a bit more stress in the system,” Attard said.
He said that the messaging around 1/1 in Asia-Pacific comes through a global filter, but he added: “Aon thinks capacity will still be available in the Asia-Pacific region, but subject to pricing and structure. The markets will be looking for risk-adjusted pricing increases to compensate for the last five years of results.”
There will also be pressure on retention levels and structures, he suggested. “SIRC is an opportunity to get a sense of how the market is looking at 1/1. But it feels as though strategies are still being firmed up for many of our reinsurance partners. Part of that is because of the stress coming through on the retro side. That informs how they deploy capacity and what their strategies are.”
