Property market remains vigilant in volatile times: Swiss Re’s CUO

“The property market is currently disciplined around terms and conditions and structures, and vigilant on increasing loss trends, property valuations, exposure management, and rate adequacy,” said Swiss Re’s chief underwriting officer, property, Mohit Pande.  

This approach, according to Pande, has been crucial as the market adapts to a rapidly evolving risk landscape. 

“The property market has made important improvements in recent years but cannot be complacent as the risk landscape continues to evolve very fast,” he said.

“Swiss Re and our peers are playing an important role as a shock absorber for the industry.”

“Exceeding $100 billion in global nat cat insured losses has become the new normal.”

Pande expects discussions in Monte Carlo to mirror those from last year, focusing on key issues that continue to dominate the reinsurance sector. 

“These topics will centre around the current volatile environment with geopolitical instability in this ‘super election’ year, elevated nat cat activity in the first half of the year, climate change, and the prediction for an extremely active hurricane season,” he said. 

He highlighted the growing importance of technology, saying: “I would expect technological advancements such as artificial intelligence (AI) and its impact on underwriting to feature in these discussions as well.”

Pande emphasised the challenges posed by natural catastrophes, particularly as they have become more frequent and severe in recent years.

“In 2023 there were $280 billion of economic losses globally from natural catastrophes, of which $108 billion (40 percent) were insured, and 2023 was also the fourth year in a row when the insured losses crossed the $100 billion mark. 2024 is already on track to breach that mark,” he said.

“Exceeding $100 billion in global nat cat insured losses has become the new normal,” he added. 

Better risk assessment 

In response, the underwriting landscape is shifting towards more realistic, forward-looking risk assessments. 

“We regularly update our nat cat models, considering the effects of climate change and other factors such as changes in vulnerability of insured assets, economic growth and urbanisation,” Pande said.

“We share these models and insights with our clients so we can together navigate this evolving nat cat risk landscape better,” he explained.

The impact of secondary perils is another focus, and Pande observed: “One thing which recent events have made very clear is that secondary perils are no longer ‘secondary’ when it comes to damage and disruption. 

“Among such perils, severe convective storms (SCS) have emerged as one of the significant drivers of increase in insured losses. Multi-billion-dollar SCS events globally have become more common, and SCS losses in the US have increased at a rate of around 8 percent per annum in nominal terms since 2008.”

Pande highlighted the need for better data and collaboration to manage these risks effectively. 

“The industry needs to invest more in increasing the coverage and refinement of these perils, and we need to feed more accurate and up-to-date data into the models.

“This exposure data then needs to be shared across the value chain so everyone can do proper risk assessment and pricing,” he asserted.

Swiss Re is, he said, committed to enhancing its modelling capabilities to better predict and mitigate these risks and has “more than 50 nat cat experts who manage 200+ proprietary nat cat models in support of underwriters”, to help the company swiftly adapt to emerging trends and incorporate them into its models. 

Pande mentioned the company’s latest strategic acquisition: Fathom, a UK-based company, which specialises in flood risk.

“Combined with the CatNet platform that we’ve had in place for many years, this has the potential to unlock new opportunities for our clients and help insurers improve the profitability of their portfolios.”

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According to Pande, inflation’s impact on property underwriting has been hard. “The recent high inflationary environment aggravated the losses in a material way and put the spotlight on the topic of inadequacy of property valuations, but we are in a much better place with property valuations than we were a few years ago.

“This environment has served as a reminder for the industry to re-evaluate and adjust deductibles that had stayed flat or the same for several years,” he noted. 

Pande concluded with optimism regarding continued collaboration with Swiss Re’s clients: “I’m looking forward to discussing with our clients how we can share more insights, knowledge, and solutions and support them beyond traditional risk transfer.”

For more news from the Rendez-Vous de Septembre (RVS) click here.

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