Scor’s Léger: One good year is not enough to pacify investors

Scor CEO Thierry Léger has sought to counter expectations of market softening at 1.1, telling The Insurer that investors will not be satisfied if the current hard market ends after just “one good year” of underwriting returns.

Léger said Scor expects stable prices and conditions at the 1 January treaty renewals, with a balance between supply and demand in most markets and most lines of business.

But Léger – who assumed the CEO role in May last year after 15 years at Swiss Re, latterly as group CUO – stressed that the market should not get ahead of itself, with “one good year” of underwriting returns not enough to pacify reinsurers (or their investors).

“There's a real fear [among] investors that this hard market is going to be over very quickly. It’s on their minds and they’re talking about it. Then we have the brokers, and it's partially their job to talk prices down and I’m in no way blaming them for doing that, but I am seeking to be the counter voice to this narrative,” Léger told The Insurer.

“Reinsurers are emerging from multiple years of losses – yes, we have seen positive returns, but collectively we have only experienced this for one year, and yet we already have all these voices growing,” he continued, hinting that the current risk landscape does not allow room for meaningful price reductions.

“The picture is very clear: risk is on the rise and demand for reinsurance continues to be on the rise across every line of business. We’re seeing uncertainty and volatility has increased across the globe for multiple reasons,” he said.

Léger acknowledged that primary insurers have seen retentions rise over recent renewals. And while the messaging is clear that reinsurers have little appetite for any drastic lowering of retention levels, an underwriting approach which “differentiates” client-to-client is at the heart of Scor’s philosophy.

“The spirit is totally clear. Does it mean we show zero flexibility? No, of course it doesn’t. We are underwriters and we appreciate that in certain circumstances we may need a mix of things to make a good deal,” he said.

Fighting accusations of cynicism, the executive highlighted that from a technical underwriting perspective, the combined impacts of climate change and inflation would mean that a retention held stable in absolute terms over recent renewal cycles would in fact amount to a reduction.

“Let’s say we've increased retentions to a level in 2023 and kept it firm in 2024 and again at the upcoming renewal in 2025, in doing so, technically I'm reducing that retention,” he explained. “This is part of my messaging to clients and I'm really not saying this in a cynical way. But technically, we are already reducing the retentions just by keeping them the same.”

The executive also called for a shift in focus during renewal negotiations. While discussions around pricing are important, he said there should be more talk about coverage and how the industry collectively can better underwrite these risks to generate an adequate return.

“It’s part of our role as a partner, not just with cedants, but across the entire chain. There's a real opportunity for the whole industry to grow and grow profitably, and that should be our aim. Discussions should reflect that.”

Speaking to the press earlier in the conference, Léger doubled down on his concerns over US casualty, warning that the line will remain troubled if the US fails to introduce tort reform to tackle the rising scale and volume of nuclear verdicts.

Another area where Scor is actively reducing its exposure is strikes, riots and civil commotion. Léger welcomed steps taken last year to reduce limits and tighten terms and conditions but said further work was required at renewal, particularly on those impacted by tensions this year.

One line Scor is watching particularly carefully in the run-up to 1.1 is cyber.

“On the one hand, it's very strategic and we have a lot of appetite to grow in that line of business. On the other hand, the pricing, terms and conditions and the demand is not where it needs to be. Pricing is not where it needs to be. That makes us less enthusiastic about this line of business.

“In the long term, cyber is going to grow, but you have to be careful.”