Swiss Re executives note current economic conditions and present economic analysis of terrorism risk insurance
12 December 2006, Zurich
Swiss Re sees growth opportunities in the US insurance industry as risks are becoming more complex. That is the message from leading experts at Swiss Re.
The Company's annual year-end economic and insurance industry review and outlook addressed the current reinsurance landscape and offered an economic analysis of the Terrorism Risk Insurance Act (TRIA).
The event was hosted by Weldon Wilson, CEO of Life, Health North America and Global Admin Re. Wilson was one of several Swiss Re executives who discussed the state of the property, casualty and life, health reinsurance industries, TRIA and the overall US economy.
Kurt Karl, Head of Economic Research, Consulting, North America, expanded on the current state of the US economy, saying that "The insurance industry needs to maintain underwriting discipline in an environment of potentially lower investment returns."
Roger Ferguson, Swiss Re's Head of Financial Services, addressed the impact that TRIA has had on the US economy. Ferguson took an economist's views of the insurance markets and the implications for the insurability of terrorism risk, stating that "Asymmetrical and ambiguous information increases potential for market failure. We need to increase the body of knowledge about terror attacks. More importantly, we need to focus on public-private partnerships. Counter-terrorism policies, international cooperation and crisis management can reduce the risks associated with global terrorism."
According to Ferguson, "An explicit government terrorism risk backstop would offer many advantages and a broader sharing of this kind of risk would also make lower premium rates possible, thereby reducing the threat of bankruptcy."
Pierre Ozendo, Swiss Re's CEO, Americas Property, Casualty, focused on the insurance industry's recovery after the severe hurricane seasons of 2004 and 2005. Ozendo said, "The 2006 cat season has been shaping up as much better given the dearth of hurricanes. Combined ratios are down and investment yields and ROE have increased this year."
"Despite the recovery from the 04 and 05 seasons and the benign season this year, we have to remain disciplined in our underwriting in order to reduce earnings volatility and establish stability in the industry as a whole," Ozendo said. "We also need to evaluate new ways to bridge capital and risk – securitization being a key practice that has been growing across the life and non-life areas alike. By August 25th of this year, USD 23 billion worldwide in reinsurance capacity was provided through outstanding ILS, with USD 8 billion in cat bonds and the remainder linked to life risks."
Donna Kinnaird, President, Life, Health North America, brought perspective on the life and health market. She noted, "Direct insurance premiums are growing again in 2006, with demand moderating for mortality protection but accelerating for asset accumulation products. Product innovation has become a key driver for both direct companies and reinsurers. New direct products provide various retirement protection, guarantees and living care riders. Direct insurance companies continue to increase the amount of risks they retain and are moving from coinsurance to yearly renewable terms."
Kinnaird also provided an insight regarding capital market transactions and direct insurance industry consolidation. "The increased availability of risk capital is accelerating consolidation and spin-off activities," she explained. "We are also seeing an increasing number of capital market transactions by both direct companies and reinsurers. We expect this trend to grow even more in the future years as companies access the capital markets to transfer risks and harvest embedded values."
All presentations from the event, along with information about the speakers and other relevant documents and publications, are available on www.swissre.com.
Notes to editors
Swiss Re is the world's leading and most diversified global reinsurer. The company operates through offices in over 30 countries. Founded in Zurich, Switzerland, in 1863, Swiss Re offers financial services products that enable risk-taking essential to enterprise and progress. The company's traditional reinsurance products and related services for property and casualty, as well as the life and health business are complemented by insurance-based corporate finance solutions and supplementary services for comprehensive risk management. Swiss Re is rated "AA-" by Standard, Poor's, "Aa2" by Moody's and "A+" by A.M. Best.
Cautionary note on forward-looking statements
Certain statements contained herein are forward-looking. These statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to a historical fact or current fact. Forward-looking statements typically are identified by words or phrases such as 'anticipate', 'assume', 'believe', 'continue', 'estimate', 'expect', 'foresee', 'intend', 'may increase' and 'may fluctuate' and similar expressions or by future or conditional verbs such as 'will', 'should', 'would' and 'could'. These forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause Swiss Re's actual results, performance, achievements or prospects to be materially different from any future results, performance, achievements or prospects expressed or implied by such statements. Such factors include, among others:
- the impact of future investments, acquisitions or dispositions, and any delays, unexpected costs or other issues experienced in connection with any such transaction, including the ability to efficiently and effectively integrate the GE Insurance Solutions operations into our own;
- cyclicality of the reinsurance industry;
- changes in general economic conditions, particularly in our core markets;
- uncertainties in estimating reserves;
- the performance of financial markets;
- expected changes in our investment results as a result of the changed composition of our investment assets or changes in our investment policy;
- the frequency, severity and development of insured claim events;
- acts of terrorism and acts of war;
- mortality and morbidity experience;
- policy renewal and lapse rates;
- changes in rating agency policies or practices;
- the lowering or withdrawal of one or more of the financial strength or credit ratings of one or more of our subsidiaries;
- changes in levels of interest rates;
- political risks in the countries in which we operate or in which we insure risks;
- extraordinary events affecting our clients, such as bankruptcies and liquidations;
- risks associated with implementing our business strategies;
- changes in currency exchange rates;
- changes in laws and regulations, including changes in accounting standards and taxation requirements; and
- changes in competitive pressures.
These factors are not exhaustive. We operate in a continually changing environment and new risks emerge continually. Readers are cautioned not to place undue reliance on forward-looking statements. We undertake no obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events or otherwise.
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