Swiss Re quit $2bn of under-priced business in renewals

Swiss Re walked away from almost $2 billion of business including substantial portions of contracts in China in the January renewals due to rates being below its targeted risk-adjusted levels, the company has revealed.

Swiss Re said it renewed $8.5 billion of the $10.3 billion of premium volume up for renewal on 1 January 2017. This represents a decrease of 18 percent, driven by "disciplined underwriting and reduced capacity in almost all segments," it said.

In particular, the company said it declined some large Chinese quota share business due to China Risk Oriented Solvency System (C-ROSS) regulation. "Risk-adjusted price quality decreased slightly from 102 percent to 101 percent, exceeding the hurdle rate to achieve Swiss Re's targeted Group ROE of 700bp above risk free over the cycle," the company said.

This disciplined approach comes against a backdrop of the company enjoying healthy growth in 2016 despite its profits tumbling by almost $1 billion. Its premiums earned and fee income for the group rose by 10 percent to $33.2 billion in 2016. Its profits fell to $3.6 billion, $1 billion less than in 2015 when it made $4.6 billion.

But it added that despite these challenges, rate decreases are slowing. "Overall market conditions are challenging but rate decreases in property (including natural catastrophe business) and specialty have started to slow down. Casualty prices remain generally more stable with significant differences by market and product," it said.

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