All eyes on Berger’s next move as Swiss Re addresses casualty reserving challenge…
Prior to the emergence of hurricanes Helene and Milton, the central talking point during this year’s conference season had been around casualty loss trends and the implications for upcoming renewals.
These concerns were primarily focused around certain US lines – notably general liability and auto – and the need for a market correction following a continued escalation of nuclear settlements.
Europe’s reinsurers acknowledged during this year’s Rendez-Vous in Monte Carlo that they would be taking a cautious approach towards casualty, with little appetite to deploy additional capital.
The likely outcome of this caution will be a reduction in ceding commissions alongside upward pricing pressure at 1.1.
Swiss Re knows more than most about the challenges emerging in the US liability space, with the reinsurer having strengthened its casualty reserves by $2.1bn last year.
A further $650mn in reserve strengthening took place during the first half of 2024 ahead of Andreas Berger succeeding Christian Mumenthaler as group CEO.
Berger is well regarded for the job he did as CEO of Swiss Re Corporate Solutions, where he helped steer a significant recovery in underwriting performance, achieving three consecutive near-90 percent combined ratios from the 120-plus percent he inherited.
How he will approach the casualty challenge has been the subject of considerable debate.
Given Berger’s ambition to improve Swiss Re’s reserve position – and his reputation as a problem solver – he may look to take a material charge during its upcoming third quarter earnings announcement.
In the short term, this may see the group miss its quarterly (and potentially full-year) profit targets but would give it a stronger buffer to withstand any further unfavourable trends.
But given that the group has already potentially exceeded its Q3 and Q4 cat budgets following hurricanes Helene and Milton, it may have less room than it hoped to address the challenge.
His next move will be one to watch closely. Some believe he will take an even more aggressive stance towards casualty reserving than his predecessor.