In the company’s recent second-quarter results, it reported an overall
growth in its property & casualty treaty portfolio of 20 percent for this year’s renewals—the equivalent of $2 billion in new premium income— without, the company stressed, any sacrifices on price.
Lippe is more bullish on the state of the market than most at the moment.
He believes a combination of factors are pushing up prices in the market. This, combined with a flight to quality among cedants, which increasingly want to deal with only the most financially sound partners, means that Swiss Re is well positioned to capitalise.
“The financial volatility, for all the problems it brings, does also
mean opportunities for us,” says Lippe. “Especially for long-tail lines, cedants want a counterparty they know will be around in 20 years to pay claims.” He adds that even if its official ratings do not yet reflect it, clients also appreciate the strong capital position the company has regained—it was more than $10 billion in excess of the level required for a AA rating as of the start of this year, the last time it released these figures.
UPWARD TRENDS He says the upward pressure on rates is partly there because of the many
natural catastrophes borne by the industry in the first quarter, but there are other influencing factors.
Catastrophe modelling company Risk Management Solutions (RMS) made changes to its US wind model earlier this year, which had the knock-on effect of increasing rates for most companies. He also notes that despite the apparent excess capital in the industry, much of it is reliant on things like share buy-backs. “It is fragile and can disappear,” he says.
On top of this, he notes that low interest rates mean it is tough to get a
return on investment on the asset side, while soft rates mean low returns on the underwriting side. “I have been in this business for more than 25 years and I am certain that enough factors are now in place for the market to turn and start to harden,” he says. “We are seeing a turning market now.”
He estimates that the average treaty in the July renewals increased by 5 percent, but he believes there is more to come on property business. On
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