SCOR buys less catastrophe retro. ILS diversification assisted: Conoscente

Global reinsurance company SCOR purchased less catastrophe retrocession at the renewals given its own property catastrophe book shrank again, but still the diversification between traditional and ILS market retro sources was a benefit, Jean-Paul Conoscente, CEO of SCOR Global P&C said today.

Speaking during an investor call today, Jean-Paul Conoscente explained that the retrocession renewal was just as difficult as had been anticipated.

During the fourth-quarter of 2022, SCOR had said that it was expecting a challenging retro market environment and that it would have to reflect market appetite in its retro arrangements for 2023, adapting the program from how it looked for 2022 to fit the availability of capital in different forms.

It also said that its reduced catastrophe exposure would benefit its ability to place a retro program that provided sufficient coverage and Conoscente’s comments today suggest this was indeed the case.

“We expected a very difficult retro renewal season, which was the case, and it was actually made more difficult by hurricane Ian,” Conoscente said today.

But he added that helping SCOR to secure the protection it needs, was its use of capital markets and insurance-linked securities (ILS) retrocession capital.

“We have a very good diversification of retro between traditional and ILS markets, and that allowed us to purchase the retro that we needed,” he continued to explain.

But added that, “On the cat side, having written less cat business we also purchased less retro limits.”

This morning, SCOR reported that its January renewal premiums written declined, with property catastrophe risks an area it has trimmed its exposure for the second year running.

Conoscente explained that SCOR secured the retrocession program it needed, despite the difficult market conditions.

“We bought all the capacity that we were looking for,” he said. “It was a difficult market in all segments, in terms of reinsurance or retro, but the capacity was there at an increased price, but as anticipated.”

Commenting on price, he added, “To give you a rough idea of the price increases year on year, for peak perils on the cat side price increases were between 20% and 30% on per-occurrence layers, and that’s to be compared to the rate-on-line increases we got on the business we accepted.”

But he noted that, “Of course, on the retro side, there was less proportional and less aggregate available, as we had signalled before and anticipated.”

SCOR had announced last year that it had increased its third-party capital support in the first-quarter of 2022, taking the capital managed under its collateralised reinsurance sidecar platform to US $400 million.

Swedish pension fund Alecta had allocated US $200 million to invest in SCOR’s new sidecar structure, a Atlas Gotland Worldwide Catastrophe Sidecar which is part of newly formed SPI, named Atlas Re Limited.

Adding Alecta as an investor took SCOR’s sidecar platform to US $300 million, before it then added another $100 million to reach $400 million after Q1 of 2022.

It’s not clear how SCOR’s sidecar platform stacks up in 2023, but it seems unlikely to have grown significantly, given the more challenging capital raising environment.

It’s assumed that SCOR’s retrocession program looks relatively similar to its forecast from Q4.