Swiss Re likes nat cat; won't be scared off by fourth costliest year on record

Swiss Re will not back down from natural catastrophe exposures despite large nat cat losses in excess of budget in 2021, chief executive officer Christian Mumenthaler has said.

"We really see this as our core competence to write nat cat," Mumenthaler told an online press briefing following publication of 2021 earnings. "There is volatility, but we have a good track record."

Nat cat events in 2021, now considered the fourth costliest year in history, brought sufficient losses to add 2.8 percentage points more than budgeted to the combined ratio for P&C reinsurance. But the 97.1% reading still proved to be the lowest since 2016. Management claims a normalised combined ratio of 94.7%, below the 95% target.

At the January renewals, Swiss Re claims to have targeted nat cat growth mainly in EMEA and the US, while maintaining a "cautious approach" to low attaching aggregate covers.

A broader retreat from natural catastrophe exposures among reinsurers often reflects an over-reliance on retrocession, Mumenthaler believes.  With retrocession rate growth exceeding primary insurance rate growth, a number of players were forced off the market.

"But Swiss Re has a large balance sheet, so we are not dependent on prices on the retro market," Mumenthaler said. The Swiss Re balance sheet is sufficiently diversified amongst P&C, Life and other "to bring capital costs down more."

Swiss Re enjoyed 5.3% growth in net premiums earned to $21.9 billion in 2021. Management credited volume and price increases from prior years and favourable currency exchange rate developments.

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