Swiss Re chair Sergio Ermotti says inflation and rising risks are driving the reinsurer's premiums. He thinks primary insurers have been benefiting too much from the trend.
Sergio Ermotti is not happy with Swiss Re’s profitability. «We need to review prices to improve our profitability,» seeing as risks have increased, along with cost of capital, Ermotti told «Handelszeitung» (behind paywall, in German.)
As finews.com recently reported, Switzerland’s largest reinsurer reported a loss of $285 million for the first nine months of the year.
«We are long-term partners, but we have to be fairly compensated for our capital. Otherwise, we will have to review our capacity offering.» Ermotti would rather give up market share than deliver a «moderate return» to shareholders.
Swiss Re, absorbs much higher volatility and has greater risks than primary insurers. This is why Swiss Re‘s returns on capital over the cycle should be at least as good as or higher than that of primary insurers, he said.
Disciplined Underwriting
In the insurance industry, it often comes down to both discipline - in regards to the contracts we underwrite - and supply. «While we can’t influence the overall supply, we do have the power over what we chose to underwrite,» he said.
Taking into account «increased inflation, higher risks and greater costs from natural catastrophes,» in some areas and for some risks, premiums could multiply, he said.
Losses from liability coverage for managers is one area gaining traction. In the US an entire industry of lawyers is waiting to sue companies or executives. Similar tendencies can also be observed elsewhere.
Credit Suisse
Ermotti, who was the CEO of UBS from 2011 to 2020, echoed previous comments made in regard to Switzerland's second-largest bank, saying «Everyone would be satisfied if Credit Suisse were strong, competitive and profitable again. Now, we have to let management and the board get on with their work.»
