Pricing on some deals now unsustainable

Some reinsurance programmes are now entering territory where the price is unsustainable, and the market seems to be stabilising as a consequence, Monica Ningen, head of property underwriting for the US & Canada at Swiss Re, told PCI Today.

“We do not see signs of hardening yet but there are clear indicators that the downward slide is lessening as some deals are entering the territory where the price is not sustainable,” she said.

The reinsurer also remains concerned about underlying policy conditions and expanding coverage. “If the expansions are not being adequately reflected in the pricing this is a bigger concern,” she said.

She added that it is unlikely a single big loss would be enough to change the market and that there are wider considerations.

“You need to consider both the event and the economic landscape, as they are connected. If we focus only on the event, it will likely need to be an event where the expected or modelled loss does not match the actual loss from the event, essentially an event that is not well reflected in costing. It will need to be something that surprises companies,” Ningen said.

Other big topics of conversation at this year’s PCI conference will include M&A activity and the search for growth. “Where is growth going to come from? What will it look like in the soft market? What needs are not being met today?” she said.

Ningen added that more insurers are evaluating the effectiveness of their reinsurance programmes and asking whether the structure meets their needs both from a frequency and severity standpoint.

“Just recently, Hurrricane Matthew was a good reminder to the industry that even though we have not seen a large event it doesn’t mean that we won’t,” she said.

“There will also be a lot of discussion around technology and changing consumer habits. There is a general feeling that the world in front of us will look very different from our past.

“People are talking about what that will look like, are legacy systems holding them back and are they positioned to take advantage of technology breakthroughs on the horizon?”

She added that given the current state of technology evolution, insurers and reinsurers should also be considering the possibilities of big data.

“Our industry is one which relies heavily on data to make key decisions daily. The big data platforms coupled with machine learning, natural language processing and cognitive computing capabilities provide the opportunity to make our decisions with more precision and at a faster speed.

“Trends such as social media, the IoT and digitising records in general mean that the volumes of data which we will need to consume to assess risk and remain competitive, will continue to grow. At Swiss Re we’re embracing the technology evolution and preparing for the future,” Ningen concluded.