Swiss Re’s chief executive highlights how the insurance sector can respond to economic pressures in 2023

Swiss Re’s UK and Ireland chief executive Jason Richards believes the insurance industry needs to be “quicker and really vigilant” in its response to economic headwinds amid fears of uncertain inflation and a recession.

The UK has been impacted by multiple pressures going into 2023 following geopolitical uncertainty and heavy natural catastrophe losses.

Among these pressures is high inflation – which has caused central banks to raise interest rates – that has been exacerbated by the conflict in Ukraine and the knock-on effect on energy markets.

According to the Office for National Statistics, UK inflation in January 2023 sat at 10.1% as measured by the Consumer Price Index.

While Richards feels inflation will reduce slightly during 2023, he questioned how long that reduction period would be.

He tells Insurance Times: “Does that go down very quickly or does it drag out?

“There’s always going to be some sort of lag before we get down to a normal level of inflation, but what is that normal level?

“Is that what we had pre-Covid? Or is it going to run at a higher level for a long period of time or not?

“So, I think inflation is one big uncertainty.”

Richards also believes the possibility of a “very severe” recession could have a “bigger impact” on the insurance market in 2023.

“A lot there will depend on if there is a recession that is deep and long and infects many companies, [meaning] companies go insolvent, unemployment goes up and demand in the economy shrinks dramatically,” he says.

“So, if you get a very severe recession, that can have a bigger impact on insurance.”

Response methods

Richards highlighted some of the key ways the insurance sector could respond to economic pressures – among these was the necessity to attract “the best” talent.

“For me, that’s where it starts,” he says.

“We’ve got to do a really good job at attracting and retaining talent from all different areas across the economy into insurance, that’s a really big one.”

On top of attracting talent to the insurance sector, Richards also believes that the sector needs to develop and improve its understanding of risk.

The industry has seen unprecedented levels of insured losses in recent years – much of this was caused by secondary perils, such as wildfires, floods and droughts, which in turn are being impacted by climate change.

He says factors like climate change mean the industry is navigating a different risk landscape. Using data to understand this landscape in a “different and better way is key”.

“We need to leverage data, tech and other insights to understand that risk landscape and adjust our underwriting strategies accordingly,” he says.

“So, that’s got to have a focus that’s front and centre. Leveraging data from many different sources is also a key element to that as well.” 

Right strategy

Richards also believes that being on top of trends and thinking strategically will be important as insurance firms battle against headwinds in 2023.

“One [thing to do] is be on top of the inflation trends and understand what you’re seeing on the loss side – in terms of loss of severity and frequency – and to really understand the trends and being quick to understand those trends,” he says.

“Then you need to look at your strategy. So, do you need to adjust the strategy? Do you need to adjust price, do you need to adjust terms and conditions on the contract?

“So, that’s where the industry has got to be, got to be quicker and really vigilant.”