Andreas Berger, Group Chief Executive Officer (CEO) of reinsurance giant Swiss Re, said this morning that the current healthy and constructive reinsurance market environment needs to be the new normal as companies must earn their cost of capital.
After posting a 24% rise in net income and strong underwriting profitability across the business for the first half of 2025, Swiss Re executives held a media call during which the firm’s CEO was quizzed on the difference between the current market cycle and previous ones.
“We have been operating now for quite some time in a very healthy and constructive market environment. And I think this is the new norm. This needs to be the new norm, because the reinsurance companies have to also earn their cost of capital,” said Berger. “And that’s the main difference to the previous period, where we had a prolonged soft market cycle, where we haven’t earned our cost of capital. This is not sustainable.”
Broker reports revealed that the reinsurance industry earned its cost of capital in 2023 for the first time in some years, and the trend continued in 2024 and is expected to persist in 2025, with reinsurance broker Guy Carpenter projecting the ROE to again exceed the cost of equity.
“And as I said before, we need a strong reinsurance industry to play the role as a shock absorber to back the insurance industry. And ultimately, the insurance industry is backing society, the ultimate end customer, the householders, the policyholders,” continued Berger.
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He went on to underline the importance of recognising that it’s not just one cycle, as each product, each line of business, has a different cycle.
“And now it’s important that you look at the composition of your portfolio, in which part of the cycle is each line of business sitting, and how do the individual lines of businesses correlate to each other? And that’s what we call cycle management. That’s our job, the proper portfolio management, and to find a good diversification in our portfolio. That’s why our clients buy reinsurance, because they want to benefit from the diversification benefit that we have as a reinsurance industry.
“So, I don’t want to compare it to the last cycle, where we had a long soft market cycle with a strong amplitude, and this, I don’t think will be happening again, if we keep the discipline in the market. And price is only one aspect. The more important aspect that people should also look at is terms and conditions. Where are the attachment points, where reinsurance is being triggered. So, there’s a lot of discipline there. There’s healthy structures there,” said Berger.
Across the January, April, and mid-year 2025 reinsurance renewals, Swiss Re’s property and casualty (P&C) reinsurance business achieved a 3% increase in premium volume, with 3% growth in nat cat, 17% growth in property, and 7% growth in specialty, more than offset a 7% decrease in US casualty as the reinsurer further pruned its exposure.
For the $20 billion of gross premium volume renewed across the year-to-date renewals, Swiss Re achieved a price increase of 2.4%, with rate increases in casualty the most pronounced. However, loss assumptions also increased by 4.1% over the three renewals, reflecting Swiss Re’s “prudent view on inflation and loss model updates, particularly in casualty.” As a result, the year-to-date net price change is -1.8%.
During the media call, Berger noted the pressure on pricing but stressed that this is from a very high base and that the market is still very attractive, which is reflected in the company’s continued growth in property and notably natural catastrophe risks.
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