Swiss Re tones war loss outlook, sees hit skewed to primary coverage

Swiss Re booked heavy reserves on likely losses from the Russian invasion of Ukraine, but toned its view to the industry’s ultimate losses and said it had avoided some of the loss-impacted lines that will plague rivals.

Swiss Re  booked $283 million in reserves related to the war in Ukraine, a sum which “should cover a significant portion of our total ultimate loss from the war” on its full range of exposures across credit & surety, marine, political risk and political violence, CFO John Dacey (pictured) told the Q1 investor call.

Like all industry guesses, the  Swiss Re estimate is based on “hardly any claims” and is given with a “very high degree of uncertainty.”

“We continue to believe that the ultimate market loss for the industry could be comparable to a mid-sized natural catastrophe loss,” Dacey reiterated of a rough estimate given one month ago.

But  Swiss Re is now honing that view. While the term ‘mid-sized nat cat event’ had been roughly taken to mean $10 – 20 billion, then pegged by the market for convenience at $15 billion, Dacey’s thinking is now edging towards the lower end of the range.

The industry-wide estimate is today’s tentative guess and talks with primary carriers on early loss recognition could be the next key check, barring a major change in martial developments.  Sums could go higher, but “we’ve not seen evidence that would take us there today.”

And where  Swiss Re had previously said it would take its standard 10% reinsurance market share, Dacey now hints at possible downside, having found “some places where we thought we might have more exposures, and we don't.” Dacey still claims  Swiss Re has “no outsize exposures relative to our market position.”

In aviation and credit & surety, Dacey believes the  Swiss Re position is “around market-weight,” Dacey said.

Aviation stands behind “an important amount” of the $283 million reserve already booked.  Swiss Re officials echo leaders throughout the industry with the caveat that “the level of uncertainty remains extraordinary” on eventual aviation claims.

Swiss Re could, however, prove underweight on some “more specific” specialty lines. Political risk and political violence “are not lines we seek out” and occurrences in the books “are pretty incidental.”

The $283 million loss reserve was booked disproportionately to the commercial primary unit Corporate Solutions, where it added 9.3 percentage points to the segment combined ratio versus a 2.9 point impact in P&C Re.  “We’re not assuming a lot of reinsurance recoverables on the events in [corporate solutions] CorSo and that is why that has gotten to be a pretty big relative number.”

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