All material subject to strictly enforced copyright laws. © 2021 Insurance Insider is part of Euromoney Institutional Investor PLC.
Accessibility | Terms & Conditions | Privacy Policy | Modern Slavery Act | Cookies | Subscription Terms & Conditions

Scor to tweak 2022 retro programme as supply of agg and pro-rata shrinks


Scor will be forced to change the structure of its 2022 retrocession programme thanks to shrinking supply of proportional and aggregate retro capacity, executives said today. 

On a call to discuss the French carrier’s Q3 results, Scor Global P&C CEO Jean-Paul Conoscente said changes to the retro programme began in 2020 when it kicked off negotiations for the 2021 programme.

At that point, the carrier had focused on procuring retro cover that better balanced protection for both the severity and frequency of cat events, Conoscente said.

While Scor is “comfortable” with the cover provided by that structure for the rest of this year, the carrier will be forced by the scarcity of some types of retro to restructure its programme for 2022, the executive added.

“We are in the process of renewing the retro programme for 2022. In that plan, we anticipate a shrinkage of capacity for both proportional and aggregate covers, and our programme takes that into account,” Conoscente said.

“We will probably look for other products to help us replace that shrinking capacity, but again, the target remains the same as in 2021, protecting against severity and frequency of events.”

The expectation that the retro market will contract is also shared by RenaissanceRe CEO and president Kevin O’Donnell, who on his own Q3 earnings call yesterday said the amount of available retro capacity would “shrink due to poor performance and substantial trapped capital”.

O’Donnell said: “Any retro that is available will likely move up an attachment level, so we'll shift protection from earnings to capital. There is less retro at lower attachment points; reinsurers will be more exposed to income statement volatility. Since the cost of accepting volatility has risen, the supply of reinsurance will decrease, and further push rate.”

Commenting on Scor’s own buying plans, Conoscente added that Scor will achieve the same level of risk protection through a mixture of alternative retro products and “taking action on the inwards side”.

Scor said in its Q3 results today that it is already rebalancing its portfolio away from life and health and towards P&C, while within the P&C segment, it is reducing exposure to cat volatility.

This comes after the carrier revealed a 24.3% cat ratio for the third quarter in the P&C segment, thanks to EUR206mn in net losses from Bernd flooding and EUR137mn from Hurricane Ida.

During today’s call, Conoscente said: “We will reduce our exposure to the first-dollar programmes where we are exposed to climate-sensitive perils.”

The comments come amid increasing concern within the reinsurance market about climate change increasing both the frequency and severity of cat events, prompting European carriers to sound a bullish note on rate increases at the next January renewal.

He added that the carrier has already pulled back from providing capacity for MGAs that are focused on US excess and surplus primary business that is exposed to North Atlantic hurricanes, as well as cutting back capacity for proportional US treaties.

Scor group CEO Laurent Rousseau added: “On the MGA actions alone, we’re talking here $200mn of [probable maximum loss] reduction: it is sizeable.”

The CEO, who took over from long-serving chief Denis Kessler this summer, added that within P&C, Scor will shift its portfolio towards specialty reinsurance where the “market is very hard” and take on more non-cat reinsurance business.

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree