Risk sharing between insurers and reinsurers has stabilised: Urs Baertschi, CEO P&C Reinsurance, Swiss Re

After reinsurers tightened terms and conditions and raised attachment points to move away from rising so-called secondary peril losses, primary insurers have now caught up and understand what it means to have higher volatility in the frequency space, according to Urs Baertschi, CEO of P&C Reinsurance at Swiss Re.

Ahead of the annual meeting of the reinsurance industry in Monte Carlo, our insurance-linked securities (ILS) focused sister publication, Artemis spoke with Swiss Re’s Baertschi as part of its series of Live video interviews.

Baertschi discussed current reinsurance market conditions, the need to close insurance protection gaps around the world, the role of alternative, or third-party capital, and more.

Throughout 2023 reinsurers pushed through structural changes to move away from frequency losses after consecutive years of poor performance on the underwriting side of the balance sheet.

As a result of the changes, global reinsurance companies generated strong results in 2023, and this has continued for non-life business in 2024 amid still favourable conditions.

Commenting on terms and conditions, Baertschi said that, “when you look at the risk sharing between the insurance industry and the reinsurance industry, there clearly was a lot of movement about a year and a half ago and 24 months ago around this and has stabilised since then.”

“Primary insurance has caught up around the reality of what it means to have higher volatility in the frequency space as well,” he continued.

Expanding on this, Baertschi told Artemis that Swiss Re expects the current environment witnessed so far this year to maintain throughout the balance of the year as well.

“This new-norm of more than $100 billion of insured losses from natural catastrophes is really here to stay, and that’s a market reality. And the vast majority of that is driven by smaller events that should be picked up in the retention of the primary insurers,” said Baertschi.

“So, with all of that, the history, the financial results, how the balance between the insurers and reinsurers in the risk-sharing is finding itself in the market, we would expect the environment to remain largely similar to the discipline that we have seen so far this year,” he added.

Discussing demand for coverage, Baertschi emphasised that demand is up and clients want to buy more reinsurance to de-risk their peak perils, adding that he expects the industry to be in an active discussion around this.

“The supply side is actually reasonably stable,” said Baertschi. “There’s been a little bit of an increase from some cat bonds late last year and this year, but overall, the supply side is reasonably stable.”

During the Artemis Live interview, Baertschi also commented on the fact the risk landscape keeps evolving, and stressed the importance for the industry, end to end, “to reflect that evolving risk landscape in the kind of products that we offer, in the rates that are being charged throughout, in the structures, in the wordings, and so these are all going to be discussions that we expect to kick off in Monte Carlo, and then throughout the rest of the renewal season.”

The full Artemis video interview with Swiss Re’s Urs Baertschi is embedded below and can also be viewed, along with previous Artemis Live video interviews, on Artemis’ dedicated video page.

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