SCOR can leverage hard market in ’23 renewals for better book

Global reinsurer  SCOR will continue to use pending renewal deadlines through 2023 to leverage continuing hard market conditions to tweak its book, but won’t likely need to heavily remediate business lines and geographies that already went under the knife in 2022, a top official has indicated.

“We do see opportunities to further improve the risk-return profile of the portfolio,” SCOR’s CEO of P&C Jean-Paul Conoscente (pictured) told analysts.

“We think the market cycle will continue as it has in January - and there will be interesting opportunities for us to continue to improve the portfolio.”

Renewal exercises will require less remediation going forward as SCOR was already working on new directions from new assumptions for the April, June and July deadlines in 2022, he said.

“The market will remain hardened in our view at those renewals … we’ll see the extent to which it continues to improve,” the divisional chief said. “There are still good opportunities, but might not be as much need for remediation as there was at January 1.”

Massive reductions in cat-prone and inflation-stricken lines at the 1.1 renewals in 2023 left SCOR with a book 12% lower in premium income, including a 20% reduction in P&C treaty. SCOR cut its 1-in-250 PMLs by 14% and said the shift should boost its net underwriting ratio by around 2.5 to 3 points. Following an upwards revision of its view to cat risk, SCOR reiterated its 8% cat budget and 95% combined ratio targets.

Reducing nat cat is no surgical procedure and SCOR didn’t always end up with the book it would have crafted as cedents presented global aggregate books. SCOR talked up its appetite for Europe, but ended up with its largest apparent nat cat reduction to European windstorm. Reducing on large programmes from European providers carrying global cat risks often meant cutting with very thick shears.

In the event, SCOR increased global lines in its book by 7 percentage points (pps) to 43% of the January 1 book while reducing property and property cat by 3 pps to 35% and inflation-stricken casualty and motor by 4 pps to 22%. Within property, proportional covers were cut 24%, in part shifted to excess of loss structures.

And despite the European windstorm glitch, SCOR increased Europe & Canada by 6 pps to a combined 61% of the renewed book. The US is down 4 pps to 14% of the 1.1 book. US. US casualty proportional was cut 48% and motor proportional 29% in order to reallocate for better margin.

But that meant pulling away from some pretty pricey business. SCOR cited 71% increase in rate on line for North American cat XoL layers written 1.1 and 44% in Europe. Tightened terms and heightened retentions also helped. “I think the cat market is as good as we’ve seen in a long time in terms of underlying metrics.”

It won’t be a capacity restriction if SCOR turns down more business moving forward. “We still have the capital to write the business we want to write,” Conoscente said. “We are not constrained by capital in terms of business opportunities.”

SCOR bought the outwards retrocession coverage it sought at the 1.1 renewals, benefitting from its reduced needs in property where it had reduced its own exposure on the front end.

“We expected as very difficult retro renewal season, which was the case,” Conoscente said. “We have a very good diversification of retro between traditional and ILS markets and that allowed us to purchase the retro we needed.”

The reduction in nat cat retro needs left SCOR able to buy “all the capacity we were looking for,” Conoscente said. “It was a difficult market for all segments, reinsurance or retro, but capacity was there, at an increased price, but as anticipated.”

Equity analysts participating in the call pressed for signal that reduced 1.1 exposures might spell increased chances for an early resolution of massive provisions written late in 2022. To no avail: volume is down, but views to risk are up “ so there is no assumption into SCR [reserves] that you can derive from that,” Conoscente said.

Did you get value from this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.