COVID-19 the final straw for an industry that needs high rates: SCOR

COVID-19 has triggered severe losses for the re/insurance industry and caused great economic uncertainty. But this was merely the final straw for the industry in terms of also leading to a hard market in fact, a number of other forces had already combined to create this.

That is according to Jean-Paul Conoscente, the chief executive of SCOR Global P&C and a member of the French reinsurer’s executive committee, speaking to Monte Carlo Today.

He noted several years of high cat losses, many years of low interest rates and social inflation trends as all being factors that had been putting upwards pressure on rates before COVID-19 came along.

“Like the casualty crisis in the 1990s, this hard market is characterised by pressure building slowly and over time, and also a great deal of uncertainty,” Conoscente said.

“The drivers are different but there are multiple reasons rates need to increase. Some of it will be payback for losses but we are also looking at much deeper trends.”

On this basis, Conoscente expects rate increases in the low double digits on aggregate, slightly more than programmes saw in the June/July renewal.

“It will very much be on a case-by-case basis and we do expect some programmes to be affected more than others,” he said.

Against this backdrop, he said, SCOR’s messages are simple.

“We have weathered the pandemic. We remain financially strong with our ratings confirmed, and we are ready to work with clients to deploy capacity as a fair and transparent business partner where we properly assess risk and price business fairly,” Conoscente said.

He added that there will be many instances across the industry where this pandemic has highlighted the need for wordings to be clarified.

“That goes for risks like cyber too,” he said. “But if there is to be any chance of finding solutions to better manage pandemics, that must be addressed.”

SCOR advocates the creation of a private-public partnership. “That is the only viable solution,” Conoscente said.

Adapting to change
He admits that against this complex and challenging backdrop, it is not ideal that face-to-face meetings are difficult and conferences all virtual. The reinsurance industry is driven by trust and relationships, he said, while accepting that people will adjust and adapt.

“This is a new normal and we have adapted like everyone else. We have organised a virtual SCOR Lounge and we will use technology to ensure we still speak to clients and convey the messages we need to,” he said.

Asked about the industry’s evolution, he said that while it was a good thing that it had provided stability and certainty to clients for so long, the world is now changing so fast it must evolve.

“The acceleration of digital transformation, for example, is something we must keep pace with as an industry so that we can develop new solutions to allow clients to cope with this evolving environment.

“We must move forward and challenge the way we have been doing things,” he explained.

It is now 18 months since Conoscente took on his current role. In that time, he has had many challenges, including cat events and now COVID-19, that have tested the resilience of his team and operation. He is pleased with the way they have responded and now has three main goals.

“We want SCOR to be the first reinsurer clients speak to when they want advice or to develop a new product; we want to be a market leader in innovation and new solutions; we want continually to work to create a better environment.

“We are not the biggest reinsurer but it is on these merits we can stand apart,” he concluded.