Swiss Re: COVID-19 revealed industry weaknesses, but opportunities abound

After a volatile year,  Swiss Re spies significant growth for re/insurance in the years to come, despite the pandemic showing up some significant blind spots and points of contention which need improving.

Swiss Re senior executives have said that the re/insurance industry is poised for a period of substantial growth as the economic disruption of the pandemic slowly subsides, despite the outbreak revealing problematic areas ranging from inadequate terms in contracts to cyber risk.

Speaking at a virtual press conference ahead of the Monte Carlo Rendez-Vous, the carrier’s chief underwriting officer Thierry Leger said the COVID-19 pandemic had tested the industry’s wordings and shown that there were some “not so well drafted” clauses that could dog the market for years to come.

However, he added, the increased focus on risk and awareness of issues from clients presented an opportunity for the market to grow its premium base over the coming years despite looming risks from economic and social inflation, unknowns in the cyber market and more-well known perils such as natural catastrophes.

The need for focus

“Overall, we see lots of opportunities out there, mainly driven by natural catastrophes, property, cyber, and the transitions to new markets. There are large opportunities ahead that should make us feel very optimistic with regard to the future,” Leger said.

“However, right now we are in a challenging environment. The interest rates remain very low, the outlook for inflation is up and we are facing a much more volatile world than ever.

“These drivers that we find at the moment require us to focus and continue to focus very strongly on underwriting results, and will require further price increases to get adequate returns on our capital invested,” he continued.

Swiss Re reinsurance CEO Moses Ojeisekhoba highlighted the difficulty ahead for carriers given the ongoing threat of the pandemic and inflationary pressures he said were being driven by government policies around the world, as well as costs from social inflationary trends and climate change over the longer term.

However, Ojeisekhoba struck a similarly optimistic tone about the potential for the market to find new sources of growth.

“If we take a step back, fundamentally we expect premiums to grow, and this presents significant opportunities,” he said.

“In the near term, the growth is driven by the fact that you have recovery from the pandemic environment. We predict that premiums by the end of this year will be 10 percent higher than pre-COVID-19 levels—and things such as greater awareness of risks will be taking place.

“There is also the complexity of risks and exposures that begin to come through. This element will drive growth in premiums in the short term,” he concluded.