Scor’s Bartlett: Nat cat retreat validated by 2023 losses
The rising tally of natural catastrophe losses for the year to date and the continued pressure on balance sheets from secondary perils have served to validate Scor’s approach to nat cat exposures, according to deputy regional chief underwriting officer Charlie Bartlett.
As previously reported, the French (re)insurance powerhouse wrote €3.66bn ($3.87bn) in gross premiums at the January 2023 renewals, a 12 percent reduction year on year as the group cut back its treaty P&C book as part of a drive to reduce earnings volatility.
This stratagem continued from 1 April, with Scor cutting limits on property proportional treaties exposed to natural catastrophes by 13 percent in a bid to maintain a stable catastrophe PML.
And speaking to The Insurer TV on the sidelines of the annual industry conclave in Monte Carlo, Bartlett, officially deputy regional CUO for Europe-Canada and CUO for UK, reinsurance at Scor Global P&C, said the reinsurer’s approach was driven by a “two-dimensional“ drive to manage frequency exposure and “right-size” its portfolio mix.
“I'd look at what we've done on the cat side through two dimensions,” he explained. “The first of which was managing downwards, quite strongly, our climate-related frequency exposure, which in practice meant heavily reducing our remaining aggregate portfolio.”
Bartlett noted that the move meant retentions had been maintained at a “sensible and sustainable level”, providing cedants with capital rather than earnings protection.
“That's an important element [of the strategy], the de-risking from a frequency perspective,” he continued.
The second element of Scor’s cat strategy has been firmly rooted in right-sizing the reinsurer’s global cat exposure, Bartlett said, adding that the company can now look to grow its exposure in line with its wider portfolio mix “irrespective” of market conditions.
“There's a recognition that we don't want cat overall to be too material a part of the book,” he said. “We've reduced it to a level of materiality that we're comfortable with, and from here, the idea should be that the cat exposure will not grow faster than the rest of the portfolio, almost irrespective of the market conditions. We're happy with the right-sizing we've done.”
Industry loss estimates for the first half of 2023 have largely converged around $50bn, driven by a record contribution from US severe convective storm (SCS) losses in excess of $30bn, figures which Bartlett said “validate” the reinsurer’s underwriting strategy and approach to managing exposures.
The second half of the year has continued to see a series of low single-digit billion-dollar events from perils such as SCS and flood, which have traditionally been viewed as secondary perils but are now often the dominant driver of industry losses. Much of the 2023 industry loss bill has been retained by primary carriers as a result of steps taken by reinsurers – Scor among them – to reduce exposure to lower layers.
“The losses we've seen in the first half of the year and since then have probably validated the steps we've taken, the measures we've made,’ Bartlett continued.
“There is a lot of small to medium-sized cat activity, often with a secondary peril flavour, so flood losses, wildfire losses, and so on. That is exactly what we were trying to contend with and making the structural changes that we've pushed through in the book.”
Watch the full 13-minute interview to hear commentary from Bartlett on Scor’s recent leadership changes and newly published strategy, 1.1 outlook, and much more…