While business issues mount over the elevated frequency and severity of pure disaster occasions, Scor says that property disaster and different business traces proceed to carry promise as long as the appropriate circumstances are met, and an applicable stability might be struck throughout its complete P&C portfolio.
Speaking to this publication within the lead-up to this 12 months’s Rendez-Vous de Septembre, Jean-Paul Conoscente, who serves as CEO of Scor P&C, stated the Paris-headquartered reinsurer “remains a large property reinsurer, and we intend to continue to provide significant capacities to our clients on a XoL basis”.
As Conoscente defined, heading in direction of the 1 January 2024 renewals, Scor’s urge for food for catastrophe-exposed proportional and mixture covers “will remain limited”.
Currently, the manager stated Scor’s property disaster portfolio “is today well balanced between US and non-US exposures”.
Speaking at a press convention to debate Scor’s Q2 ends in July, the reinsurer’s newly appointed CEO Thierry Léger stated the corporate had diminished its property cat capability “quite significantly” within the interval main as much as and together with 1 January, particularly in local weather change-exposed areas, together with decrease layers, frequency layers and mixture covers.
At the earnings dialogue, Conoscente stated the corporate sees property disaster business “as being attractive”.
And chatting with The Insurer, Conoscente stated that if pricing, together with phrases and circumstances, proceed to enhance within the US, then Scor “will look at potentially growing our appetite on cat XoL business above the 1-in-10 return period”.
Further property enhancements wanted
While it stays to be seen whether or not these enhancements are forthcoming, Conoscente is adamant additional correction is required, regardless of the speed rises and tightening of phrases and circumstances which have lately been imposed.
“We believe that despite the successive waves of price increases, property insurance remains underpriced in the US and elsewhere because climate change claims inflation has been growing faster than price increases,” stated Conoscente.
Some exceptions to that may be discovered inside the extra and surplus traces house, though even inside that fast-growing business phase, the cases the place pricing is enough are “limited”.
“Due to a mix of elevated exposures stemming from building and inhabitants growth in risk-exposed areas, and elevated frequency and severity of climate-related occasions ensuing from the brand new local weather regime now we have witnessed for the previous seven years, [we believe that] cat claims will proceed to quickly enhance, requiring each a evaluate of the bounds deployed in some areas, in addition to continued vital pricing enhancements.
“The first half of 2023 was a good illustration of this,” Conoscente declared.
The want for additional worth rises and strengthening of phrases and circumstances will not be restricted to only the US both, the manager stated, with different areas of the world additionally in want of enhancements.
“The significant increase in climate-related cat claims is not just a US problem,” stated Conoscente.
“It is indeed a global problem. As we see, significant flooding, wildfires and tornado/hail events are now commonplace around the world. All property prices need to reflect this new reality,” he stated.
Casualty additionally underneath strain
It will not be solely in property the place there may be want for enchancment. The casualty reinsurance sector’s profitability can be underneath strain because it battles the impression of inflation – each financial and claims-based – whereas the worth rises which have been prevalent in most of the major business traces that assist quota shares have slowed or, in some sectors, reversed with fee reductions now being utilized.
“On the US casualty side, we believe the segment profitability is still challenged overall as claims inflation continues to grow significantly year on year, whereas primary price increases have slowed down or stopped,” Conoscente stated.
“For reinsurers, the issue is exacerbated by high commission levels, which are no longer sustainable,” the manager acknowledged.
Looking forward to 2024, Conoscente forecast that US casualty quota share commissions “will be a very contentious area” throughout renewal discussions as a result of, the manager stated, “reinsurers’ margins are insufficient to absorb the type of claims volatility we have witnessed on US casualty and auto losses”.
“To be sustainable, primary rates need to increase much further; and reinsurance commissions need to get back to mid-20s level,” he acknowledged.
Eyes cyber progress
While Scor has adjusted its portfolio in some segments, with property disaster being a notable instance, the reinsurer has been building out its e book of cyber business.
Scor at present writes simply over €200mn in cyber, and customarily targets excessive single-digit/low double-digit shares throughout reinsurance applications.
Conoscente stated cyber stays an space of progress for the whole business, in addition to for Scor. However, he stated the phase stays underneath stress provided that demand outstrips provide, whereas pricing has began to flatten and even transfer downwards following a number of years of great will increase.
At the identical time, whereas ransomware claims are as soon as once more on the rise, the (re)insurance coverage business is but to face a very catastrophic, systemic cyber occasion.
“As a result, all actors including reinsurance take a prudent stance on cyber accumulations,” Conoscente stated.
“Scor will continue to do so whilst accompanying our current clients on their portfolio expansion.”
Engineering and marine progress
Cyber is simply one of many world traces and specialty segments the place Scor is trying to doubtlessly develop its e book, with engineering and marine each providing enticing returns to reinsurers, Conoscente stated.
“Given our underweight presence in these segments, we believe them to be attractive areas of growth potential for Scor,” he famous.
Some areas the place Scor is taking a extra cautious strategy embody credit score and surety, together with monetary traces and D&O. Conoscente stated these sectors “are very sensitive to economic cycles, and the future landscape remains very stochastic”.
Elsewhere, Conoscente pinpointed agriculture-related traces of reinsurance as one other space uncovered to local weather change, inflicting Scor to stay cautious.
“We have also seen agricultural lines of business suffering from the effects of climate change in a similar fashion to property lines of business,” he stated.
“Whilst we want to remain a major reinsurer in this area, we need to better manage our global balance and plan to grow slightly in countries where we are currently underweight; and restrict our growth in our peak countries.”
Aside from business line-specific coverages, Conoscente predicted Scor’s structured options staff will entice better curiosity from purchasers who’re grappling with elevated capital constraints, after they had been hit with elevated reinsurance retentions and continued portfolio volatility.
“We already have a well-established alternative solutions team in Europe and plan to expand it globally, whilst significantly upscaling our current portfolio,” highlighted Conoscente.
Scor ended 2023’s second quarter with a P&C mixed ratio of 88.5 p.c, a significant enchancment on the 113.1 p.c the reinsurer posted for the prior-year interval.
For the primary half of this 12 months, Scor’s P&C mixed ratio was 86.9 p.c. That result’s consistent with Scor’s full-year assumption of 87 p.c, though CEO Léger expressed dissatisfaction on the excessive attritional loss ratio contained inside the determine.
Conoscente stated Scor is constant to deal with the pricing adequacy throughout its complete P&C portfolio because it seems to scale back its attritional loss ratio.
“This means incorporating all new claims trends in our pricing, and allocating capital to lines of business providing the best returns,” the manager acknowledged.
“We believe our 2023 portfolio largely achieves this and we will continue to push for improved terms and conditions with the same determination and resolve,” Conoscente added.
