Lukas Müller

Opportunities and challenges in the reinsurance sector and a commitment never fading

“Commitment is what transforms a promise into a reality… the power to change the face of things.” Abraham Lincoln’s statement is reflected in the strategy of Swiss Re. The company has been present in the Middle East and North Africa (MENA) region since the early 70’s and aims, according to Mr. Lukas Müller, Market Head MENA & Francophone West Africa, to stay committed to its clients and partners.

Mr. Müller, Hightlighted that trend towards a more sustainable reinsurance market will continue, after reinsurance companies have absorbed heavy losses for many years, resulting from the increasing frequency of natural disasters.

* How do you evaluate the state of the reinsurance sector during the year 2023, in the MENA region and internationally?

The reinsurance sector has been facing challenges for many years, now, with the increased frequency of natural catastrophes all around the world, Reinsurers have absorbed a disproportionate amount of losses from these events, especially from secondary perils. This has affected the net results of reinsurers and they have been under pressure from investors, analysts and rating agencies to prove their resilience, financial solvency and profitability. In 2023, we have started to see a return towards a more sustainable equilibrium in risk sharing across the value chain. The market has made great strides toward more sustainable structures and a new pricing equilibrium. This is a necessary path that we expect to continue for the foreseeable future.

What are the main reasons that led to these results?

One of the main reasons is the increasing frequency of losses, particularly in the natural catastrophe line, were secondary perils like flash floods, droughts and wildfires are having an increasing impact. So far, secondary perils received significantly less attention than peak perils like earthquake and windstorm across the value chain of insurance and reinsurance. As a result, the industry has not completely caught up on commensurate pricing for such frequency perils.

Let’s look at a few specific re/insurance lines: have cyber and natural catastrophe insurance become part of the general re/insurance offering in the MENA region?

We are living in a globally connected world, where new technologies are used in the MENA region as well. Cyber is a great example of the high demand for non-traditional lines in this region.

Swiss Re has historically been active in the NAT Cat space, also in the MENA region. However, as mentioned, we have recently seen frequent natural catastrophe events such as floods, hailstorms and unprecedented natural phenomenons across the region. these risks must be adequately priced. For the re/insurance market to be sustainable, prices need to reflect the risks.

* What are your expectations about the renewals of 1/1/?

After reinsurance companies have absorbed heavy losses in the past few years, reinsurance pricing is returning to more sustainable levels, and we expect this trend to continue. At Swiss Re, we will keep pursuing our strategy for the MENA region. We expect that the discussion about treaty structures will continue as we still see a need in some areas to better define which losses should be carried by primary insurers and which losses by reinsurers. This discussion has already started, but more improvement is needed.

It is noticeable that new players in the field of reinsurance are entering the region.

– What are the reasons? And the results?

I haven’t seen a big number of new players entering the market, those who entered are heading the specialty lines of business. In the majority of general lines we still see the existing big players in the region. At Swiss Re, we are keen to have sustainable relationships. We have been present in the MENA region since the early 70’s and have built relationships dating back to those years. We want to maintain these relationships and also be here for our clients and partners going forward, we are committed to them.

* What are Swiss Re’s main achievements for the year 2023? What are your plans for upcoming year?

In the MENA region, we will continue to work with a number of selected companies. Furthermore, we will keep strongly supporting our clients and partners not merely with traditional risk transfer, but also with added value services such as risk modelling, actuarial analysis, special products and solutions. Our aim is to remain a key player in the region and be a long-term value adding partner. In 2023, the industry in the MENA region has made strides towards a more sustainable reinsurance market. After the heavy losses that reinsurers have suffered in the past, we expect this path to continue for the foreseeable future.