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Mario Greco says he has tamed the large-loss monster at Zurich

Any carrier troubled in recent months by large losses, be they property or casualty, will have noted Zurich CEO Mario Greco’s claim last week that his company has neutralised the threat.

Greco told participants in an investor day last week that his company has brought “large losses volatility in a corridor” and they are such a non-issue for the carrier that he and CFO George Quinn don’t even mention them anymore.

Large losses are not “interesting to discuss with you anymore”, said Greco, with what one hopes was a dose of Italian disinvoltura.

The stance is a turnaround from the situation just before the arrival of the former Generali CEO at Zurich in March 2016. The company in 2015 led the roster of those hit by the Tianjin port explosions and fire, taking a $275mn hit in the third quarter, as part of a sequence of outsized losses under previous management.

The investor presentation on Thursday showed that it had reduced volatility by more than 60 percent between Q4 2015 and the end of June.

The change reflects a greater use of strategic reinsurance, which Zurich previously shunned to maximise the potential returns available by keeping risk net on its huge balance sheet.

CFO Quinn said reinsurance is one area where Zurich has undergone a complete transformation since 2015 as executives elaborated on new targets set for the next three years.

A heavier use of reinsurance is, of course, mirrored across the Atlantic, where AIG under group CEO Brian Duperreault and general insurance CEO Peter Zaffino has been passing on more risk to reinsurers and taking smaller net bets.

And back in Europe, Axa XL is also targeting reduced volatility through a new reinsurance programme.

Swiss Re Corporate Solutions appears to have come to the same conclusion as Zurich and AIG albeit a little later, with CEO Andreas Berger in July naming a reinsurance rethink and GWP cuts of 20 percent as tactics for achieving a combined ratio of 98 percent for 2021.

Incoming AGCS CEO Joachim Mueller will be taking note of rivals’ reinsurance strategies as he seeks to address a persistent underwriting loss.

There are two distinct ironies to this increased interest in reinsurance buying at this point in the cycle.

Firstly, it comes at a time when sustained underperformance and pricing correction in primary and retro mean that reinsurers are girding themselves to fight for rate rises of their own.

And secondly, this desire to cede away primary business as rates earn through that exceed loss trends, means that insurers are likely ceding away more margin than they did through the years of the soft market.

All of which is to say that they may have fixed their eyes pretty much entirely on the rearview mirror.

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