Swiss Re Corporate Solutions fell to a $323m nine-month loss as Covid-19 cost $678m, but its parent group was keen to stress that the turnaround at its primary insurance unit is “gathering momentum” and underlying results show improvement.

Meanwhile, Swiss Re group posted a $691m let loss for the first nine months of this year, although it reduced its deficit on Q2 after achieving net income of $444m in the third quarter. This compares to net income of €1.3bn for nine months last year.

Swiss Re saw Covid-19 losses increase by $500m in the third quarter to total $3bn for the year so far.

Swiss Re Corporate Solutions’ $323m nine-month loss might not look that impressive but remains an improvement on the $441m recorded in the same period last year. Its 2020 combined ratio stands at 118.7 percent, compared with 127 percent a year ago.

While these results are far from what Swiss Re would have liked, it seems happy with an improvement at Corporate Solutions once Covid-19 losses are not taken into account.

The unit would have delivered net income of $221m and a combined ratio of 96 percent. The latter is significantly ahead of the unit’s 105 percent estimate for 2020 that was set as it attempted to turn around poor performance. Return on equity would have stood at 12.3 percent

Swiss Re said the nine-month performance reflects the “benefits of management actions announced in 2019, including achievement of more than 70 percent of the planned portfolio pruning”.

More than half of Swiss Re Corporate Solutions’ pandemic losses were reserves for anticipated claims related to event cancellations, a line of business it exited in 2019. The remainder of the losses came mainly from property and credit and surety claims.

Net premiums earned were 3.6 percent lower at $3bn, as active portfolio pruning was cushioned by rate improvements of 15 percent for the first nine months of 2020.

In addition to the hit taken by Swiss Re Corporate Solutions, some $1.6bn Swiss Re’s total $3bn Covid-19 loss fell on reinsurance business, with $689m on life and health reinsurance.

Swiss Re said uncertainty surrounding many factors related to the pandemic remains high and could impact claims developments in the coming quarters positively or negatively, relative to its projections.

Swiss Re’s P&C reinsurance business posted a $201m loss for the first nine months and a combined ratio of 110.3 percent. This compares to net income of $880m and a combined ratio of 101.4 percent a year earlier. Without Covid-19, it would have achieved net income of $1bn.

The firm said the numbers were supported by “strong recent renewals”. Large natural catastrophe and man-made losses amounted to $1.5bn for the first nine months of 2020. Natural catastrophe events in the third quarter were “above expectations”.

Group CEO Christian Mumenthaler said: “Swiss Re is well equipped to benefit from an improving market environment. Our capital position is very strong, allowing us to pursue profitable growth as prices develop favourably across both our P&C Re and Corporate Solutions businesses.”

Global insurance prices rose 20 percent in Q3, with increases of 34 percent in the UK and 15 percent in continental Europe, according to Marsh’s latest index, which saw the biggest jump since it began tracking figures back in 2012.

Marsh’s third-quarter Global Insurance Market Index shows that all regions around the world, except for Latin America with 9 percent reported double-digit price increases during period. All rises were equal to, or greater than, the increases in Q2.

Pricing was up in all regions for the eighth consecutive quarter, and the average cost of insurance around the world has now risen every quarter for three years.

Commenting on the findings, Lucy Clarke, president of Marsh JLT Specialty and Marsh Global Placement, said: “Challenging conditions continue to exist across many parts of the insurance marketplace. Uncertainty, particularly related to Covid-19, and loss experience in many lines have both contributed to this three-year trend of increasing insurance costs. For many clients, these conditions are occurring at a time when they can least withstand them, and are leading many companies to rethink their insurance buying patterns, including increasing retentions, reducing limits and modifying policy terms and conditions. As we expect these challenging conditions to persist into 2021, we are committed to ensuring we leave no stone unturned when it comes to the best outcomes for our clients in this market.”

The index’s average Q3 year-on-year composite global price rise of 20 percent follows an increase of 19 percent and 14 percent in the first two quarters of 2020, respectively.

Global property rates rose 21 percent in the third quarter, after jumps of 19 percent in Q2 and 15 percent in Q1.

The biggest increase came in global financial and professional (finpro) lines, which were up a whopping 40 percent on average in the last quarter. Finpro prices rose 37 percent in Q2 and 26 percent in Q1.

Casualty pricing was more stable and up 6% in Q3, following a rise of 7 percent in the preceding quarter and 5 percent in the first, according to the index, which predominantly tracks large accounts.

The UK saw the biggest third-quarter increase of 34 percent. Hardening is accelerating after a rise of 31 percent in Q2 and 21 percent in Q1.

UK property pricing was up 20 percent. Hardening is picking up speed here too, with more than 80 percent of Marsh clients facing increases in Q3. In general, larger clients faced higher increases (of between 25 percent and 30 percent) than midsized firms, which tended to see rises of between 10% percent and 15 percent

Marsh said insurers have “tightly managed” available capacity for UK property risks and continued to scrutinise risk improvement. Many risk recommendations from insurers are becoming requirements for cover, it added. Marsh also warned that property exclusions for Covid-19 continue to be a concern.

UK casualty pricing was up 6 percent in the quarter, with increases fairly similar for each quarter in 2020. Pricing increases were generally higher for mid-market clients.

Public and products liability showed the highest increases, with average pricing up 13 percent for mid-market clients and 8 percent for large buyers. Employers liability pricing increased in the mid-single digits.

Marsh said price increases were prevalent in excess layers, where insurers increased minimum rates, and added that insurers reviewed coverage terms as they sought to reduce exposure to silent cyber.

But UK finpro lines saw the biggest increases, with an eyewatering 67 percent rise in costs, driven largely by D&O. Public company D&O continued to dominate pricing, with increases averaging more than 100 percent

Marsh said more than 40 percent of clients adjusted retentions or limits to offset price increases. It added that economic uncertainty due to Covid-19 added to the challenging market.

UK cyber pricing increased 17 percent, as increased frequency and severity of claims affected prices.

Overall, third-quarter price increases of 15 percent in continental Europe were the same as Q2, following a rise of 8 percent in the first quarter.

Property was up 21 percent and for the eighth consecutive quarter. Pricing continued to accelerate, driven by complex placements and cat-exposed programmes.

All buyers experienced increases. Those in major countries – including France, Germany, Italy and Spain – experienced double-digit rises.

Marsh said pressure on rate and limits on capacity drove increased use of traditional wholesale markets in London and Zurich, as well as demand for alternative structures. Insurers worked to apply communicable disease and cyber-related exclusions in the quarter, it added.

Like elsewhere, third-quarter continental European casualty price rises were less acute at 5 percent General liability and excess lines led the increases, particularly for companies with North American exposures.

Marsh said pricing increases were prevalent across most casualty products and in most countries. But auto liability was generally stable. Workers compensation, where available, increased in the low-single digits.

European finpro pricing rose by 24 percent with insurers selective in their approach and willingness to deploy capacity.

Price increases for D&O liability continued for major programmes in distressed sectors or with US exposure, as larger buyers faced the biggest hikes.

Marsh said clients adjusted deal structure parameters to mitigate price increases and, again, demand for wholesale markets expanded.

Year-on-rear US pricing was up 18 percent in Q3. This is the same as the preceding quarter but higher than the 14 percent in Q1. Marsh said there was firming in the majority of lines.

US property pricing was up 24 percent with 85 percent of renewing Marsh clients experiencing an increase. US property pricing has now increased for 12 consecutive quarters.

Generally, larger clients with more than $1m in premium experienced higher increases, of about 35 percent than smaller firms, which faced 20 percent

Marsh said many clients adjusted their insurance programmes to offset or limit pricing increases. More than 15 percent of clients increased retentions and more than 20 percent reduced limits.

The broker said insurers continued to manage US property exposure by pushing for higher deductibles and adjusting policy terms and conditions, with many looking to reduce or eliminate non-physical damage coverage.

The average cost of Q3 US casualty cover was up 8 percentLarge and complex umbrella excess risks continued to see the greatest increases, generally ranging from 30 percent to 60 percent although higher increases were seen.

Marsh said limits on primary general liability policies trended higher, to address actions from lead umbrella insurers to attach at higher levels.

US auto pricing increased 7 percent but workers compensation fell by 3 percent

US finpro insurance prices increased by an average 28 percent in the third quarter, driven by D&O, which was up nearly 60 percent

Pricing in the public D&O market was up more than 50 percent and more than 90 percent of clients saw an increase.

Marsh said price increases occurred even as many clients increased retentions and reduced limits.

US employment practices liability pricing rose nearly 10 percent with increases tied to Covid-19 issues. Cyber pricing increased 11 percent the largest increase since 2016.

After the UK, the Pacific region saw the biggest increases in Q3, of 33 percent according to Marsh’s index. This follows a rise of 31 percent and 23 percent in the preceding quarters. Property was up 31 percent in the third quarter and casualty 11 percent

Finpro costs rose by 49 percent with D&O increases dominating. Marsh said many public companies faced D&O increases of more than 100 percent

The broker added that D&O policy wordings typically underwent numerous edits to mitigate pricing impacts and a notable reduction in appetite from insurers continued.

It added that there were reduced limits on many public companies’ D&O programmes as a result of clients’ unwillingness to accept price increases and a lack of available capacity.

Meanwhile, average prices were up 12 percent in Asia, after rises of 9 percent in Q2 and 6 percent in Q1. Property pricing was up 18% and casualty just 1 percent Finpro cover rose 18 percent

Latin America saw the smallest price rise of 9 percent in Q3, compared with 8 percent in the second quarter and 6 percent in the first. Property cover was up 15 percent and finpro 26 percent Latin American casualty pricing fell by 4 percent n the one bright spot for buyers.

In a results call earlier this week, Marsh & McLennan’s president and CEO Dan Glaser said the “harsh” market trends have been accelerated by Covid-19. The speed of rate increases at a time of financial distress for many industries is causing real problems, he added.

“We don’t like the speed of the increases, ultimately; I don’t think that benefits the market or benefits our clients when it snaps back in such an, at times, harsh way. Particularly in this kind of environment, where clients, in certain industries, are really feeling a lot of pressure on revenue and survival, and then being hit with large levels of insurance increases, it’s a real tough environment and we’re doing our best for our clients in the circumstances,” said Mr Glaser, according to Seeking Alpha.

He added that price increases seen in Japan’s April reinsurance renewals and Florida’s June renewals continued into October.

“These were larger increases than at 1 January, but primarily driven by loss-impacted business,” said Mr Glaser.

“Guy Carpenter’s US rate online index was up 12% year over year in July, reflecting reduced alternative capital inflows, constrained retrocessional capacity and traditional reinsurers exercising caution regarding the amount of capital they are willing to expose in the face of wind, wildfire and developing Covid-19 losses,” he continued.

Adding: “The P&C insurance and reinsurance markets overall are showing a heightened degree of scrutiny and risk selection, with a continued push for higher pricing.”

John Doyle, president and CEO of Marsh, said buyers are using different strategies to navigate the hard market, including higher risk retention, buying less cover and using captives.

“Some clients are being forced to retain more risk… whether it’s through higher retentions or in very, very few circumstances, where we can’t get the limit that we would like, or that our client would like, but with some level of frequency clients are electing to retain more risks,” he said.

“And the other dynamic I would mention as well is we are seeing an increase in the number of captive formations. So, there are a lot of different strategies and we are obviously helping our clients navigate the market as best we can,” he added.

A fresh directives to insurance companies for  covering of risks arising from strikes, riot and civil commotion will soon be issued by the regulatory of insurance, National Insurance Commission, Naicom.

The Commissioner for Insurance, SundayThomas said this at a
Professionals Forum, hosted by the Chartered Insurance Institute of Nigeria in Abeokuta today.

Speaking on the development, the NAICOM Boss said the recent outbreak of protests and civil unrest across the country and the resultant losses had exposed the vulnerability of government, businesses and individuals to unforeseen events.

These incidents, according to him have further reinforced the value and necessity of the insurance industry.

He said risks arising from strikes, riot and civil commotion which were redundant in the past and which by competition are mostly offered free of charge must now be adequately rated as an important product for the survival of Nigerian businesses.

However, he lamented that “these incidents are likely to increase insurance claims, thereby exacerbating the already weakened liquidity and capability of insurance companies.”

The NAICOM boss said the incidents have further reinforced the need for proper underwriting to ensure insurers are able to settle corresponding claims obligations to cushion the effect of losses on Nigerian households and businesses.

He said, “It is pertinent to note that insurance coverage for Strike, Riot and Civil Commotion clauses, which were redundant in the past and which by competition are mostly offered free of charge must now be adequately rated as an important product for the survival of Nigerian businesses.

“The Commission will be issuing directives to ensure that underwriting is strengthened to appropriately rate and charge requisite premiums so that profitability can be guaranteed and claims are settled promptly without financial strain on the companies.

He noted that while most losses arising from the Coronavirus pandemic are not adequately covered by existing insurance policies, it had become obvious that current insurance product offerings are not adequate to respond to emergent risks and needs of the society.

Thomas said there is, therefore, the need for a review of conventional insurance products in order to upscale the value proposition of the Nigerian insurance industry.

“We cannot continue to ignore the impact of unforeseen events on individuals, businesses, and the insurance industry as a whole.

Thomas also said insurance should act as the platform to relaunch economic growth.

He said, “As Nigeria reals in the pain of the destruction and losses suffered this year, the Nigeria insurance industry must utilise the opportunity to lead in the quick recovery and restoration of the affected businesses and also showcase its role in reinforcing the economic resilience of individuals, businesses and the economy at large.”

He also linked the increased propensity for claims to the suddenness of the Covid-19 pandemic which imposed immense pressure on all businesses including insurance business.

He said claims could come from pressures faced by consumers in the form of reduced finance and business activities, lack of access to credit, expiration and wastage of perishable goods, temporary or permanent business closures and employee contract terminations, life threatening and death.

The CFI said the pandemic had curtailed the ability of the industry to sell insurance products which in turn reduced premium income because of the traditional in-person sales and marketing.

AXA Mansard, the Nigerian subsidiary of the AXA Group, posted a 5.4 percent turnover increase in the first nine months of 2020.

The latter rose from N37.434 billion ($102.72 million) at 30 September 2019 to be set at N39.462 billion  ($102.44 billion) one year later.

As at 30 September 2020, the net profit amounted to N5.671 billion ($14.72 million) compared to N2.11 billion ($5.79 million) a year earlier, an improvement of 168.7 percent over one year.

The incurred losses increased by 22.9 perceny to be set at N14.34 billion ($37.23 million) compared to N11.665 billion ($32.01 million) in the first nine months of 2019. During the period under review, AXA Mansard is believed to have shown resilience in the face of the on-going pandemic.

From L- Mr Akin Ogunbiyi, Chairman of Mutual Benefit Assurance; Mr Austin Enajomo-Isire, Chairman, Nigerian Social Insurance Trust Fund, NSTIF; Mr Chuks Okonta, Chairman, National Association of Insurance & Pension Correspondents, NAIPCO; Mr Rasaaq Salami, Deputy Director, Corporate Affairs of the National Insurance Commission, Naicom and Mr Val Ojuma, MD, FBN Insurance at the 5th conference of NAIPCO held in Lagos on Wednesday

By Favour Nnabugwu

National Insurance Commission, Naicom, said it is waiting on the communique from the discussion at the 5th National Association of Insurance Correspondents, NAIPCO, to consider as part of the measures for the safety and financial soundness of the insurance sector.

Speaking on behalf of the Commissioner for Insurance, Mr Sunday Thomas, the Deputy Director, Corporate Affairs of the Commission, Mr Rasaaq Salami in Lagos today, the issues of rearing on return on investment has been worrisome to the Commission hence the theme of the 5th Conference was apt at this time.

The CFI said, ” The issue of return on investment has been a concern to the commission that is why l believe that the subject of today’s discussion, ‘Promoting Bankable Investments Portfolio for Insurance and Pension Sectors’, is very apt”

“Naicom will await the outcome of the discussion at this conference for consideration in the commission to ensure safety and financial soundness of the sector”.

The outcome of the discussions at the 5th NAIPCO conference is very important to the Commission. It will proffer solution that we need in the Commission on how fund can be properly invested”

Also speaking, Chairman, Mutual Benefits Assurance Plc, Dr. Akin Ogunbiyi, called on government at all levels to support and patronize the Nigerian Insurance industry to achieve its objective and ensure returns on investments.

Ogunbiyi said the industry can achieve adequate return on investment and capital adequacy ratio through support and patronage of the Nigerian Insurance industry by government at all levels and also by ensuring reduction of sharp practices to its barest minimum.

While noting that the industry can accumulate retain earnings and shareholders funds on a sustainable basis through good corporate governance and adaptive leaders that recognize and respond to insurance needs and relevant adjacencies.

He said the industry also require commitment and dedication from all of us to achieve survival, growth and profitability, adding that as a result of the prevailing not too favourable investment climate, capital preservation yields are not as profitable as before.

Ogunbiyi who was the NAIPCO website Chief Launder, said the Financial assets such as debt and equity instruments as well as money market and equity funds are returning low yield.

He noted that though inflation at 13.9 percent, one loses money in real terms as Fixed income may guarantee cash flows, but with negative profitability.

“I want to submit that we can achieve adequate return on investment and capital adequacy ratio through. Support and patronage of the Nigerian Insurance industry by government at all levels and Reduction of sharp practices to its barest minimum”

“We can accumulate retain earnings and shareholders funds on a sustainable basis through good corporate governance and adaptive leaders that recognize and respond to insurance needs and relevant adjacencies. We require commitment and dedication from all of us to achieve survival, growth and profitability,” he pointed out.