Swiss Re Corso’s McGrath: US property insurance conditions do not reflect long-term risk landscape

By Michael Loney

May 27 - (The Insurer) - Swiss Re Corporate Solutions’ Katie McGrath has said that the U.S. property insurance market needs to catch up with the sophistication of risk managers to meet their needs over the next five years, and also explained the rationale behind her company’s move towards a market units structure.

McGrath is currently North America CEO of Swiss Re Corporate Solutions but will become chief underwriting officer of Swiss Re’s commercial insurance unit at the start of next month.

In an interview with The Insurer at RIMS’ Riskworld conference in Chicago earlier this month, McGrath said: “I think there's a little bit of a disconnect around where I think the risk landscape is going long term and where the market is right now.”

McGrath said she understands the situation, with carriers needing to push through large rate increases in recent years and buyers now having a short-term desire for rate relief.

“But then if you look out in the three- to five-year landscape, it's just getting more challenging,” she said, pointing to greater uncertainty resulting from increased insured natural catastrophe losses and geopolitical tensions affecting factors such as replacement values and supply chains.

McGrath said that conversations with risk managers suggest that they see the three- to five-year outlook as a bigger concern than the immediate market conditions.

“As a carrier, it is ours as well. So what do we do about that? We can all deal with some price pressure. I think it's (more about) the long term of: how do we really help in the assessment, the mitigation and, eventually, the transfer of the risk?”

McGrath suggested the market needs to move on from the previous expectation of a carrier or broker partner just estimating potential losses and giving a price.

“The level of sophistication of this risk management community is unbelievable. When you think about that level of sophistication, I think not every carrier layering it with a three- to five-year view will be able to perform at the expectation of these risk managers,” she said.

McGrath said that Swiss Re Corporate Solutions is looking to help companies transparently assess that risk. This includes the company having a risk data and services platform that can help clients to assess risk, and risk engineers to help with the mitigation of risk.

“And the third piece is what used to be just risk transfer is really about innovative solutions. How can you look at a program more holistically?” she said.

“In a hard property market our clients have taken on more and more retention for their captives, so how do we set up structured solutions for them? Or if they haven't set up a captive, can we set up a virtual captive for them so that they get the look and feel of that?”

McGrath said that adding a multi-year and multi-line solution with clients’ captives can “create in an uncertain time some certainty” and allow them to lock in a retention base and a price they are comfortable with.

In addition, McGrath said there is much more utilization of parametric solutions.

“If you do take the higher retention or you get some savings in the market from the price point in the next 12 months, why wouldn't you use a well-placed parametric as part of the holistic view?” she said.

CORSO INTRODUCES MARKET UNITS STRUCTURE

Swiss Re in February named New York-based McGrath as CUO of Swiss Re Corporate Solutions, an appointment that is effective June 1. She will succeed Kera McDonald, who was appointed Swiss Re's group CUO as of the same date.

Swiss Re Corporate Solutions also in February announced a new organizational structure to serve corporates and brokers more closely at a country level, introducing new market units with respective heads named.

The market units structure is also effective June 1, and comprises Asia, Australia and New Zealand, Canada, France, Germany, Ibero-America, Switzerland/Benelux/Nordics/Italy, UK and Ireland, and U.S.

Discussing the new structure, McGrath said: “Swiss Re has always been known for its technical excellence, risk knowledge and thought leadership, but, if we were being self-critical, where we were falling down was commercial thinking and speed.”

She continued: “The end goal with what I would call a light restructure was to ensure that the level of decision making was flattened and that we could get to our markets faster.”

The market unit structure takes out a layer of regional oversight that was in place under the previous regional structure.

“There's certainly cost savings in that but that was not the goal. The goal was to empower our market units and to act with more expediency,” McGrath said.