Zurich could not renew cat agg reinsurance if the market was too difficult: CFO Quinn

Giving a signal on how the world’s very large carriers might choose to navigate a tougher reinsurance renewal environment, George Quinn, Zurich’s chief financial officer, explained that the company might choose not to renew its global treaty. disaster if the price was too high. .

logo-zurichReporting its third quarter and nine-month results this morning, the European-headquartered reinsurer/insurer said Hurricane Ian is expected to have a net impact of US$550 million on the company.

However, the most recent renewal of Zurich’s reinsurance program saw its attachment to the US catastrophe treaty at $650 million, so Hurricane Ian did not reach that amount.

George Quinn, Chief Financial Officer, said on a conference call with analysts today: “We estimate the net impact of Hurricane Ian at US$550 million before tax. This is an exposure-based figure and sits a little below our reinsurance attachment point. »

When asked how Zurich intends to respond to perceived trends of higher frequency and severity of disaster-related losses around the world, Quinn said there could be some reduction in exhibitions.

“Possible pruning of cat wallet to try to withstand some of the increased frequency and severity. We’ll probably push further, but I don’t see us doing anything particularly dramatic,” he explained.

Analysts then asked Quinn about reinsurance market conditions and how Zurich might be affected by a tougher market, to which he suggested that Zurich is well positioned, not needing to rely on the reinsurance as much as small carriers.

On the fact that reinsurers are likely to charge more on renewals, Quinn said it was “probably a net positive rather than a net negative.”

“The reinsurance market is definitely a little tougher than it has been in a while, but it still looks pretty orderly to me,” Quinn explained.

Adding that Zurich has a “preference to keep the reinsurance towers as they are because it keeps things predictable, but let’s see how the renewal plays out.”

Emphasizing that “we are not particularly dependent on reinsurance and I think it helps the overall market if reinsurers provide capital at a higher price and it could also help the sector to remain disciplined”.

Another analyst asked Quinn whether the fact that Zurich won’t make any reinsurance recoveries for losses caused by Hurricane Ian might actually position the insurer better than its competitors.

“The $550 million loss does not meet the $650 million retention limit that we have,” he said. “Will it help me with renewals?” It’s hard to say.”

But he acknowledged that if the reinsurance market tightens significantly, Zurich will likely play to its strengths and the fact that it can retain more risk and isn’t as reliant on reinsurance could work in its favour.

As an example, Quinn said the company might consider not renewing its global catastrophe reinsurance treaty, which he says is not essential for the business because it can retain more volatility if it had to and that the cost of hedging was deemed too high.

He said if reinsurance market conditions are too difficult or prices are too high, Zurich might choose not to renew the blanket cover because it is not seen as so important to the business.

Zurich’s global annual catastrophe reinsurance coverage pegs $900 million of eligible losses for the company, a deductible that will now be certain to be eroded to some degree, thanks to Ian and other events.

Which may be telling, that in a hardening reinsurance market, less limit can be bought, which might help balance the supply-demand equation a bit, but certainly won’t be enough to stop the hardening.

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