Léger: 1.1 capacity unaffected by L&H saga although cautious on US casualty and SRCC

Scor CEO Thierry Léger has confirmed that results in the Paris-based reinsurer’s life and health (L&H) business in the first half of the year will have “absolutely no impact” on its ability to deploy capacity at the upcoming 1.1 treaty renewals.

Speaking at a media briefing at the Rendez-Vous on Sunday, Léger addressed the ongoing reserving issues in the group’s L&H portfolio.

In July Scor issued a profit warning driven by actions taken in its L&H portfolio, reporting a group net loss of €308mn for Q2, with its full-year earnings target also at risk.

“A little bit of the elephant in the room is the L&H results of the first half year. Will that impact our capacity on the P&C side? My answer is absolutely not, our capacity is unaffected by this,” said Léger in Monte Carlo.

“Writing profitable business in P&C allows us to create some capital. As long as we are able to continue to grow the business in a diversified way, that has an additional benefit.”

Elsewhere, Scor global P&C CEO Jean-Paul Conoscente underlined that, despite a narrowing of the capacity gap for the global reinsurance segment, market discipline and price adequacy remain high amid rising risk exposures.

“There is still a very high level of losses throughout the market, but through 2023 and 2024 we’ve seen very good overall market discipline,” he said.

“This allowed severe market corrections in 2023 on the cat side, and in 2024 a continuation of the same discipline – probably with more flexibility, but keeping the price adequacy of the business at a very good level.”

Caution on US casualty and SRCC

Despite assurances of abundant capacity and generally attractive market conditions at 1.1, the duo added that Scor will continue to exercise caution over troubled lines of business and perils – namely US casualty, and strikes, riots and civil commotion (SRCC).

“We think US casualty is going to be a segment where we see significant difficult discussions at renewals,” said Conoscente. “Most current market conditions, in terms of profitability, are adequate or attractive. US casualty, in our view, will be the one exception.”

He added that Scor currently has “very low” appetite for US casualty owing to the absence of sufficient improvements in primary rate and reinsurance commissions.

The litigation industry (currently estimated to have $15bn of assets under management) is forecasted to grow at a pace of 10-12 percent, outpacing (re)insurance price increases.

“US casualty remains a troubled area. Today, the market is converging to a more negative view of US casualty, with loss trends exceeding price increases. It’s not just a matter of changing the commission by one or two points, that’s not going to solve it.”

Léger added that US casualty will remain a troubled line of business as long as the US fails to introduce tort reform to tackle the rising scale and volume of nuclear verdicts.

“We’ve been very clear at Scor over several years that we found it very difficult to find the right price for this risk. As long as these litigation funds find enough to invest in getting the means, we’re the ones paying on the other side,” Léger continued.

“If this is not solved at some point in time, I really think that US casualty will run into an insurability challenge, and I think that Monte Carlo will probably be another difficult year of renewals and discussions for US casualty.”

Another area where Scor is actively reducing its exposure is SRCC, with civil unrest fuelled by the shift to a multipolar world, increasing socio-economic complexity, and the externalised cost of industrialisation.

“Civil unrest is an issue we raised last year, and there’s a number of markets where this was addressed through change of wordings and change of limits,” Conoscente concluded.

“We see there is still work to do. France was an example this year, and the US remains a concern for us. There’s many countries where we see this risk on the rise, and therefore having a blanket coverage that’s not adequately priced for will not be acceptable.”