“Soft-hard” pricing after recent renewals leaves reinsurers under pressure, DWIC 2019 heard from a roundtable debate on the state of the market

Pricing remains competitive for reinsurance in the region following recent renewals, putting reinsurers under continued pressure to manage costs. 

This was the consensus at a roundtable debate held at the end of the first day of the Dubai World Insurance Congress 2019.

“Pressure is coming not only from head office but also from shareholders,” said Eric Lafage, Scor’s market manager for property and casualty treaty business in the Middle East.

Lafage noted that the French reinsurer had a return on equity of around 4%. “That’s clearly not up to expectations, as the objective is to produce 8% across the cycle, and it requires making up the difference to raise it to 8% in the long run,” he continued.

“Some of our competitors have released negative results, so the pressure is on,” LaFage added.

Peter Englund, Zurich’s senior executive officer in Dubai, summed up the flattened state of the market.

“Sometimes we use the term ‘soft-hard market’,” he said. “We see pockets of hardening portfolios and upward rate pressure. On construction, for example, we see some hardening of rates. In other areas we see more pressure on rates.”

Farid Chedid, chairman and CEO of broker Chedid Re, gave a broker’s eye view. “The state of the reinsurance market in this region is very competitive, on all classes and lines of business,” he summed up. “Property and engineering have been losing money for the past ten years, for reinsurers and insurance companies,” Chedid continued.

Longer-tail lines on the casualty have also been subject to weak pricing, but the claims picture will take much longer to ascertain. “On casualty and financial lines, rates have also been dropping. The difference is that those are long-tail so we will only see the full results after several years,” Chedid warned.

Stability on pricing has at least been reached on aggregate, speakers suggested. It is just that the level reached is barely adequate to cover costs. “We cannot control global capacity,” Chedid added.