trending Market Intelligence /marketintelligence/en/news-insights/trending/9A2zj-Wcb5iJGf8eT6SOGw2 content esgSubNav
In This List

Heavy Q3 claims will put 'positive pressure' on reinsurance prices: Scor P&C CEO


Insurance Underwriting Transformed How Insurers Can Harness Probability of Default Models for Smarter Credit Decisions


The World's Largest P&C Insurers, 2023


The Worlds Largest Life Insurers, 2023


Essential IR Insights Newsletter Fall - 2023

Heavy Q3 claims will put 'positive pressure' on reinsurance prices: Scor P&C CEO

The heavy claims bill for the reinsurance industry in the third quarter "should remain a positive pressure on the rating environment ahead of the Jan. 1 renewals," according to Scor SE's nonlife reinsurance head.

Speaking to analysts about Scor's third-quarter earnings Oct. 24, Jean-Paul Conoscente, CEO of Scor Global P&C, added that the company "will be focused on improvement of our margins" at the Europe-dominated Jan. 1 renewals, when roughly half of the world's reinsurance renews.

He said Scor would benefit from the continued hardening of insurance prices as its business is largely proportional, where reinsurers pay a set percentage of all claims incurred by the primary insurers they cover, and so reinsurance pricing is tied to the primary rate. The company is also expecting improvements in reinsurance terms, he said.

Scor suffered a series of natural and man-made catastrophe claims in the third quarter, as well as an increase in attritional non-catastrophic claims. Natural catastrophe claims added 12 percentage points to Scor's 99.4% third-quarter combined ratio, mainly emanating from Hurricane Dorian in the U.S. and Caribbean, which cost the reinsurer €92 million, and Typhoon Faxai in Japan, which cost it €89 million.

The claims pushed Scor's catastrophe claims ratio to 7.6%, above its 7% budget, helping drive the combined ratio for the nine months to Sept. 30 up to 95.7% from 93.6% in the prior-year period.

Man-made losses included "a number of space claims," several "sizable" U.S. casualty claims emanating from its Scor Business Solutions primary insurance division, and an estimated €23 million of credit and surety losses from the failure of U.K. travel company Thomas Cook.

Rate hikes to come

Conoscente also said rates would continue to rise in the U.S. and Japan. On U.S. casualty business, he said the price increases seen in 2018 and so far in 2019 "are just keeping up with the loss trends," which warrants "additional price increases in 2020 ... on the insurance side and a lowering of commissions on the reinsurance side."

Despite the problems casualty claims have caused some U.S. primary insurers, for example pushing Travelers Cos. Inc. to report lower-than-expected third-quarter earnings, Conoscente said that Scor had been "very cautious" in growing its casualty book, and that the company's U.S. business is "still predominantly property-driven."

He added: "Even though we see these effects on our portfolio, the effect from a reserve point of view has been negligible, and we feel we are still adequately reserved from a U.S. casualty point of view."

Japan has been hit by typhoons Faxai and Hagibis so far in 2019, after heavy claims from Typhoon Jebi in 2018. Conoscente said Japanese insurers' mentality was to pay reinsurance back over time in premiums for losses, noting that the payback period for losses from the 2011 earthquake and tsunami had been four years.

He said prices for catastrophe excess-of-loss business, where reinsurers pay out after insurers' claims bills hit a specific trigger point, had increased on average by 25% in Japan in 2019 and that "we expect price increases to continue in 2020." He added, however, that Japanese insurers typically want to give payback for losses across the whole portfolio, rather than just claims-affected programs.

"This is what was achieved after the 2011 losses," he said. "We expect a very similar trend to happen at this renewal."

Japanese business tends to renew in April 1 each year, while U.S. renewals are concentrated around June 1 and July 1.

Scor CFO Mark Kociancic told analysts that it was too early to comment on Scor's claims bill from Typhoon Hagibis, which struck Japan on Oct. 12 and which modeling firm AIR Worldwide has estimated could cost the industry up to $16 billion.