Reinsurers’ financial strength & diversification key to mitigating cat losses: Swiss Re

After reinsurers paid over $150 billion in global claims across property, casualty, and specialty lines in 2023, Swiss Re’s Urs Baertschi has emphasised the industry’s critical role as a shock absorber, a springboard for addressing the protection gap, and a compass for data-driven decision-making.

Writing in a blog post for Swiss Re, Baertschi noted that annual global insured losses of more than $100 billion from natural catastrophes have become the new normal.

He continued, “The exact figure that reinsurers contribute to natural catastrophes varies by event; for large severity events it can amount to over two-thirds of the total insured loss.

“For example, Swiss Re estimates that reinsurers will fund approximately 80% of the Caribbean losses from this year’s Hurricane Beryl, the earliest category 5 hurricane on record.”

According to Baertschi, the reason reinsurers can play the role of a shock absorber is largely down to pure financial strength and global diversification.

Baertschi went on, “At Swiss Re, we have 50 experts who manage 200 proprietary NatCat models in support of colleagues in 80 offices around the world who understand local dynamics and can respond swiftly to the challenges of our clients.

“This type of close partnership between insurers and reinsurers is critical to building resilient societies and economies, however, more is needed to reduce the protection gap.”

Indeed, despite re/insurers’ aforementioned ability to boost economic and societal resilience, Baertschi stated that the global protection gap for NatCat alone reached $172 billion in 2023.

“If we aim to shrink this gap, we need a multifaceted approach that addresses disparities in insurance coverage across different populations and countries,” he added.

To drive further progress as a re/insurance industry, Baertschi also underlined the need to leverage data to better predict future risk without being “too anchored” in biases of the past.

He continued, “As a reinsurer invested in the power of data and technology, we’re here to support clients with the tools and solutions essential to understand and mitigate risk, unlock innovation and improve performance.

“To further push the boundaries of insurability, it’s vital that data flows effectively through the value chain. As perils arise or intensify – such as extreme weather, rising jury awards in the US or cyber threats – we need accurate and timely data to recalibrate models and provide forward-looking scenarios that help us price risk accordingly.

“These insights also facilitate deeper conversations and better collaboration to create optimal re/insurance structures and find innovative risk-sharing solutions.”

Concluding the blog post, Baertschi wrote, “As a reinsurer, Swiss Re helps our clients navigate other headwinds including macroeconomic volatility, geopolitical instability, climate change and energy crises.

“Beyond traditional risk transfer, we provide insights, knowledge and tools that improve risk awareness and inform effective risk management strategies.

“We are a partner for our clients’ progress – a predictable shock absorber, a springboard for new ideas and a compass to guide decisions on the best path forward.”

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