Swiss Re CEO Sees Silver Linings In Bear Market

Michael Ha

NU Online News Service, April 9, 4:25 p.m. EST?The Swiss Re Group chief executive officer said today he seespositive prospects for both property-casualty and life-healthreinsurance markets, as the insurance industry continues to focuson improved combined ratios and growth opportunities.

John R. Coomber, speaking at a Swiss Re forum titled "ManagingRisk in Turbulent Times," noted that the industry is still in themidst of one of the worst bear markets of the last hundred years, adecline that started in 2000.

"What was the reason for that in 2000? Maybe it was thetechnology bubble, corporate scandals, and maybe a general gloom ofthe world economic situation," he said.

"Whatever it is, it was still going down at the end of 2002 andit hasn't come back very much today, and it has a major impact onthe balance sheet of the insurance industry."

Additionally, interest rates, which are currently at a 40-yearlow in the United States and a 50-year low in the U.K., will remainthat way for some time, Mr. Coomber predicted.

For these reasons, he said, the insurance industry is extremelyfocused on improving combined ratios and achieving underwritingprofit.

Zurich, Switzerland-headquartered Swiss Re earlier reported acombined ratio of 104 percent for its Property & CasualtyBusiness Group for 2002, down from 110 percent the year before.

The goal for this year, Mr. Coomber said, is to bring the ratiodown even further, to a profitable level below 100, which will beachieved largely by repricing in 2003 renewals. "We expect thehardening market in the p-c sector to continue for some time," Mr.Coomber said.

He also observed the turbulent times that the insurance industryhas been facing also became an impetus for improvement andchange.

The highest-ever loss level in 2001, Mr. Coomber said, led toemphasis on technical results. Waves of corporate defaults andscandals created sensitivity to corporate governance. And growinglitigious environment, combined with "unreasonable rewards," hesaid, prompted increased focus on contractual language and riskmanagement.

Another topic addressed at the Swiss Re forum was the overallcost of catastrophe losses in 2002 for insurers.

Werner Schaad, chief underwriting officer at Swiss Re's Property& Casualty Business Group, said natural catastrophes andman-made disasters cost non-life insurers $13.5 billion worldwidelast year.

Breaking that result down, he said, natural catastrophes causedthe majority of losses at $11.4 billion, while man-made losses were$2.1 billion. The overall loss was much lower than the 2001 figureof $35 billion, and the loss makeup also marked the return ofnatural catastrophes outweighing man-made disasters after 2001,when the world saw costly 9/11 terrorist attacks.

Commenting on natural catastrophes, Mr. Schaad added that, in2002, while property losses were below the long-term average, floodlosses cost insurers a record $4.1 billion.

"The economic losses caused by the floods are significantlyhigher than the insured losses," he said." Flooding is the growingchallenge in catastrophe insurance, but it presents opportunitiesfor growth and the possibility of fruitful public-privatepartnerships," he added.