Jan.1 renewal reports from the world’s two biggest reinsurers reveal that the firms adopted different strategies to try and make the best of mixed market conditions.
Swiss Re, newly crowned as the world’s biggest reinsurer following its acquisition of GE Insurance Solutions, took a conservative approach. It pruned its U.S. liability business, for example, but grew its Asian premiums.
Munich Re, on the other hand, appears to be targeting growth of its overall market share with a relatively bigger increase in total in-force premiums. It boosted U.S. business while reducing its exposure to emerging Asian markets.
Swiss Re wrote SFr9.3 billion of premium at the Jan. 1 renewals, a 1% increase over the SFr9.2 billion of business that was up for renewal. Its overall premium volume for traditional treaty business remained static at SFr8 billion. A shift in business mix prompted property and speciality lines to grow by 6% and motor lines to reduce by 10%.
Premium volumes for European treaty business remained unchanged, while volume for the U.S. segment fell by 13% because of reductions in liability business. More business from Asia’s emerging markets stimulated a 23% increase in premiums from the region.
Swiss Re’s corporate risks business and its credit and surety business grew by 14% and 12% respectively to produce a total for the two portfolios of SFr1.3 billion.
Munich Re, by comparison, increased its total in-force premiums by 5%, writing more new business than it cancelled, unlike rivals such as Swiss Re and Hannover Re. Munich Re had about Eu8.9 billion ($10.6 billion) of treaty business up for renewal at Jan. 1.
It was more cautious about business from China and emerging Asian countries than Swiss Re, but found growth in other areas. The German reinsurer increased its share in non-hurricane-exposed U.S. business, and benefited from rate increases in Europe and in loss-affected natural catastrophe business.
Some analysts believe Munich Re’s expansionist strategy is potentially damaging for the wider market. William Hawkins, European insurance analyst with investment bank Keefe, Bruyette & Woods, said in a research report that Munich Re is looking to recover market share after the capital-related pressures of the past few years. “We judge this as relatively good for Munich Re but concerning for the global market outlook,” Hawkins said in the note. “So far, this is happening at the margin and within a disciplined, model-driven framework – but this is how price competition always begins.”
Renewal overviews have been issued by other Europe-based global reinsurers, including Hannover Re, Converium and Scor. None of them grew their overall portfolios.
Hannover Re said it scaled back its writing of risks in loss-prone lines such as U.S. windstorm, where it made a 22% cut. But gross premium income for the entire property/casualty reinsurance portfolio remained stable because of rate increases. Out of a total premium volume of €3.98 billion in property/casualty reinsurance in the 2005 underwriting year, treaties worth altogether €2.67 billion – or 67% of Hannover’s total premium volume – were up for renewal at Jan. 1.
A volume of €2.35 billion was renewed, whereas treaties worth €318 million were either cancelled or renewed in modified form. Including additions of €278 million from new and modified treaties as well as rate improvements, the new premium volume from the renewals was €2.63 billion and gross premium income for the property/casualty reinsurance business group was slightly down at €3.95 billion.
Converium said it wrote and bound an estimated non-life premium volume of around $1.13 billion during the renewals, which is a fall of about 3%. Inga Beale, Converium’s new CEO, said in a statement that the company’s franchise had remained resilient and robust, despite the challenges presented by its financial strength rating. Converium is rated BBB+ by Standard & Poor’s.
Beale noted an increasing trend for clients to retain more risk by shifting to non-proportional covers, resulting in lower overall reinsurance market volume. Including life and health business, the company expects total gross premiums written for 2006 of between $1.8 billion and $1.9 billion.
French reinsurer Scor wrote gross premiums worth €2.05 million in the full year of 2005, down 6% compared with 2004. Non-life premiums were stable at €1.38 billion, while life reinsurance premiums fell 12% to €1.02 billion.
