SCOR cuts back on climate exposure amid developing risks

SCOR cuts back on climate exposure amid developing risks | Insurance Business America

Reinsurance

SCOR cuts back on climate exposure amid developing risks

US casualty segment also affected

Reinsurance

By
Kenneth Araullo

SCOR SE is reducing its exposure to climate-related risks and US casualty due to pricing not keeping up with exposure, according to Jean-Paul Conoscente, CEO of SCOR P&C.

SCOR is also building buffers into its reserving for both short- and long-tail lines, according to chief financial officer François de Varenne. This includes a conservative €62 million ($67.4 million) net reserve for the Baltimore bridge disaster. For this complex loss, SCOR is taking a cautious view of its loss estimate.

As per AM Best, climate risk remains a major concern for the industry, with high inflation translating into higher insured values and above-average insured losses, said Conoscente. This also creates additional capacity demand that is not being met by alternative capital.

Catastrophe prices are near the cycle peak, and SCOR expects high catastrophe prices for the rest of 2024 and into 2025. In the US, SCOR continues to keep its catastrophe exposure underweight compared to other segments.

In US casualty, SCOR has seen underwriting improvement among clients and better reinsurance conditions as commissions fell 2%, Conoscente said. However, US casualty rates are not sufficient to offset loss cost inflation, which is expected to exceed 10% in most casualty lines. SCOR plans to keep its capital allocation flat in the segment while supporting key clients and remaining cautious.

SCOR achieved 17% revenue growth at April 1 renewals with attractive margins, Conoscente said. Conditions stabilized after a hardening slowdown following Jan. 1 renewals, with overall prices rising 3.2% and nonproportional business increasing by 6.3%.

Property catastrophe saw slight softening, especially in Japan, but rate decreases were limited, and terms and conditions remained attractive. SCOR improved the quality of its book and nearly doubled its alternative solutions premiums at April 1, focusing on capital relief quota shares with low economic capital consumption.

SCOR in other lines of business

In Asia, motor and property were the main lines of focus, with April 1 renewals representing less than 15% of the overall renewal portfolio but about 60% of Asian premiums renewing. SCOR diversified by growing across all specialty lines at April 1, particularly in marine and energy, engineering, and inherent defects insurance.

Non-US casualty premiums rose 19%, mainly in India and Japan. SCOR wrote new business in credit, surety, and cyber with adequate rates, Conoscente said.

First-quarter net income fell to €196 million from €311 million a year earlier. Gross written premiums rose to €4.95 billion from €4.74 billion, while insurance revenue increased to €4.11 billion from €3.93 billion. The property/casualty combined ratio worsened to 87.1 from 85.2.

Strong P&C results allowed SCOR to build reserve buffers, de Varenne said, contributing to a positive view of loss trends.

The natural catastrophe burden was low in the quarter, with a burden of 7.2 percentage points on the combined ratio due to updated loss information for a 2023 hailstorm in Italy.

Higher new business contract service margin was supported by good Jan. 1 renewals. Due to portfolio rightsizing, the P&C share of the total portfolio was lower in 2023 but is expected to normalize over time.

The L&H segment insurance service result fell partly due to negative US mortality experience. SCOR is monitoring its US mortality portfolio and underlying assumptions. New L&H business declined in the first quarter, as there were no large transactions compared to the previous year. Despite this, SCOR remains optimistic about the rest of the year, with new business mainly in protection.

Investment income was strong, aided by an elevated regular income yield of 3.5% and reinvestment rate of 4.7%, de Varenne said.

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