Earnings improvement possible without shrinking
While many commentators paint a grim picture of the reinsurance industry’s prospects given the generally softening market, there are pockets of opportunity in less-densely-populated and capital-intensive business lines, according to Swiss Re head of client markets for Germany Nordics and Baltics Thomas Witting.
As such, his outlook is not as bleak as that offered by some of his peers. “I would describe conditions as challenging, but these are not tough times,” Witting told Global Reinsurance at the Baden-Baden meeting.
While acknowledging that it is possible for cedants to get cheaper rates in business that is accessible by the whole reinsurance market, for example property per-risk and catastrophe business in non-peak zones, he says better prospects exist in more challenging lines.
“For some business, where you have long-tail components, where there have been losses, or where you need lots of local expertise, there are far fewer reinsurers that can write that,” Witting said. “In these areas you would certainly be able to agree on acceptable conditions. You could even see price increases in certain areas.”
He added: “You cannot generalise. There are still areas where there is chance to make a profit. It is not necessary to deploy our capacity where rates have decreased to an unprofitable level.”
For example, given the large number of weather-related losses across Europe so far this year, some cedants are looking for greater coverage. “That is an area we would think we can get reasonably-priced business,” Witting said.
As a result, Witting is sanguine about Swiss Re’s prospects for the year and beyond. “I do not expect profitability to be worse in 2010 – I expect we can improve profitability without shrinking,” he said. “It is certainly not a hard market, but we can certainly avoid being hit by the full force of a soft market.”