Swiss Re is one of the largest global reinsurers. Headquartered in Zurich, Switzerland, it provides reinsurance protection worldwide. Swiss Re sources a significant proportion of its premium income from the United States.
However, the United States insurance market is inherently volatile, especially in liability insurance and workers' compensation.
In its annual report for 2023, Swiss Re highlighted the need to strengthen liability reserves in the US and announced further reserve strengthening in Q3 2024.
With the annual report for 2023, Swiss Re also published loss triangles for the year-end 2023 for the group and each individual line of business.
Swiss Re is a reinsurance company that was founded in 1863 and is headquartered in the city of Zurich. It is one of the most well-known reinsurance companies in the world. Throughout the years, the firm has changed over time, and I am particularly excited by the fact that it has grown over the years into an industry giant that specializes in offering insurance and reinsurance services. This provider offers more than just: corporate solutions, P&C reinsurance, and L&H reinsurance. The firm has a broad clientele which consists of myriad stakeholders including, businesses, government and insurance agencies.
Residing in the United States makes it difficult to come up with competitive and reliable insurance providers but a good amount of Swiss Re’s earnings originate from that country. There are numerous difficulties and fluctuations within this industry, but those fluctuations are the cause behind Swiss Re’s profit (Swissre, 2020). There are limitations to this industry and in order to properly manage the risks involved, one requires long-term financial strategies along with a policy within this unpredictable world. For students or professionals looking for cheap assignment help, understanding these complexities can be crucial.
The reserving of claims is one of the most primary operations of doing business in the firm. This process for claiming so few reserves, helps protect the coverage against losses from claims that have been planned for, but have not been claimed or previously recorded. This helps satisfy claims that policyholders have made and also instills confidence within other parties that are engaged with the organization. Reserve or insufficient level of reserves throughout an organization is significantly detrimental to an organization for a variety of reasons, such as a decline in profit reports or esteem.
7 Years | MA
In the face of competition and the need to address market needs, Swiss Re takes advantage of the tested claims management approaches in the United States where industries tend to be more volatile such as workers' comp and liability insurance.
Discuss the reasons for the reserve strengthening in 2023 and 2024. What is the impact of the reserve strengthening of the combined ratio overall and on the strengthened line of business(es)? [30 marks]
The reserve strengthening implemented in the financial years ended 2023 and 2024 illustrates the challenges of operating in a risky insurance environment especially in the United States. Some of the objectives of this measure are to counter increased claims costs factors, trends in the economic and legal sphere and demands for higher level of reserves (Swissre, 2024). At the framework level, there is still structural issues present namely social inflation, alongside the American liability markets which are rather difficult. Their professional and general liability profiles were severely affected which in turn increased the predicted levels of awards and settlements across the market. These “super claims” for more than $100M appeared rather frequently in medical malpractice, product liability, and even in D&O coverage (Cahill, 2024).
Particularly, work-related injury liabilities faced econometrically driven adjustments as medical therapy alone witnessed an average annual treatment increase of 8.2% and more prolonged care durations. The first reserve estimates for severe claims were bracketed over and under the 15-22% mark, scalpel and drug reserves often dovetailing to cost estimates set by pharmaceutical boards and advanced medical procedures (Swissre, 2024a).
These claims developments put pressure on the financial results due to its very high combined ratio for the company Swiss Re. The combined ratio that reflects how many percentages of earned premiums are being used to provide for losses and expenses was affected by the reserve movements. For example, the professional liability reserves were ‘step up’ to 110% in view of the experience of prior years’ claim developments. On the other hand the general liability business ‘steps up to 105% due to developing super claims. Moreover, the rate of the workers’ compensation line fell by 7 points mostly due to growing medical inflation. These changes reflect company strategic challenges organized around a firm’s reserves and the need to strengthen them because of solvency and coverage.
In response to these contractual challenges, Swiss Re undertook a number of enhancements to reserves throughout the third quarter of 2023. 1.2 billion USD was spent on the professional liability reserves for the accident years between 2015 and 2019. This was done so as to cater for the development of unexpected claims that were noticed in these years. It also added $800 million to its general liability reserves. That helps to address unidentified developing claims that were not fully identifiable at the prior-year end. In addition, to respond to the increase in medical treatments costs and extended time periods of care, Swiss Re put an additional $450 million to its reserves concerning workers’ compensation (Swiss Re, 2024a).
Get assistance from our PROFESSIONAL ASSIGNMENT WRITERS to receive 100% assured AI-free and high-quality documents on time, ensuring an A+ grade in all subjects.
Reporting and regulatory changes, for instance Solvency II in Europe or state level regulations in the United States put a lot of pressure on insurers as to the timing of reserve actions. These frameworks require insurers to hold adequate capital required to exit the business and safeguard policy holders (Europa, 2025). Third-party plafond attention over the sufficiency of the reserves in the re-insurance sector required a forward-looking approach. The actions taken by Swiss Re resonated with the wider developments in the market since sizable reinsurers increased their reserves by an aggregate of $4.8bn in 2023 (Swissre, 2024b).
This company’s management is more risk averse and long term strategy prevails over short term considerations (Swissre, 2024b). That allows them to be able to take the blows in the present, and gear up for the future market challenges.
By analyzing Swiss Re’s loss triangles (only the liability lines), which of these claims reserves are still developing? What might be the reasons for the uncertainty about the ultimate claims reserves even after 10 or 12 years? [35 marks]
Swiss Re’s loss triangles are quite informative about claims reserve development particularly for liability lines that takes long periods to develop. Medical, environmental, product and general liability are some of the liability lines that show gradual reserve development over the years due to their intricacy.
Liability lines yet developing
Medical malpractice
The losses from medical malpractice claims take many years to settle and precedents alter reserve estimates (Brazier, 2020).
Environment Liability
Claims for such things as pollution are equally time consuming because the laws are always changing as is the public perception on the environment.
Product liability
Product liability claims may occur long after product consumption, and high-severity events could emerge when not expected (Brothers, 2024).
General liability
General liability claim frequencies are influenced by the concept of social inflation, which causes higher settlement values and jury awards.
The Reasons Why Uncertainty Persists
The following factors explain reasons why claim reserves of the liability lines remain volatile even after a period of 10-12 years-
Litigation Duration: Pursuit of liability claims often take time to complete especially, in cases of doctor’s negligence and other issues regarding the environment. Most of these delays can lead to changes in reserve as other information comes to the surface (Swissre, 2025).
Evolving Legal and Social Frameworks: Instability exists due to the development of new laws and changing culture, especially with increasing jury awards and new emerging standards.
Economic Fluctuations: These two factors, inflation and medical costs, among others make it even harder to discharge claims especially in worker’s compensation and medical malpractice insurance.
Emerging Risks: Uncertain risks such as cyber liability and climate change do not have many reference points by which to estimate reserves accurately while actuarial models that rely on reference points fail to consider new phenomena or innovations in reporting standards.
Actuarial Limitations: Claims reserving is based on past statistics and latent factors that have not taken into consideration newly formed trends or changes in the claimants’ behavior (Swissre, 2024b). Some deviations in reporting practices include: delayed reporting or under-reporting of claim that may help hide long-term trends.
Swiss Re management implications
The continued growth of these liability lines serves to remind Swiss Re needs sound actuarial methods and effective reserve management best practices. Key implications include:
Financial Stability: Another action for which constant provision is required is reserve adjustments in order to achieve solvency and retain confidence of other parties (Hasanudin Hasanudin, 2024). Swiss Re financial position is secure; hence the firm can handle any rise in reserves that could be unpredicted.
Improved Forecasting: Incorporation of funds in the annual spending plan for better data analytics and scenario modeling may further improve the degree of certainty of reserves in upcoming years (Matrokhina et al., 2023).
Regulatory Compliance: Regulatory value such as Solvency II in Europe call for the organizations’ transparent and adequate reserving mechanism (Europa, 2025).
In case these challenges are managed, Swiss Re will be in a position to handle features of long-tail liabilities without compromising the organisation’s reputation of being conservative in accepting reinsurance risks.
What are the rating agencies saying about Swiss Re under reserving? What is your view of the measures taken by the reinsurer? [20 marks]
The strategies implemented by Swiss Re for building reserves have remained a matter of great concern to major rating agencies like Moody’s, S&P and A.M. Best. The way they endorse or critique the company is as follows:
Moody’s: Owing to concerns of social inflation and long-tail liabilities, Moody’s appreciated Swiss Re for initiating the correction of the reserve shortfalls. The changes were in the right direction but required fiscal restraint and also demonstrated the difficulty of estimating obligations in volatile markets.
S&P: The Swiss Re’s propensity for financing stability was commended by S&P. It did cite the company’s excellent capital base but sought to downplay the impact on short term earnings because of the reserve boost. S&P cautions that if continuous adjustments to reserves are not properly managed they could lead to a loss of investor confidence.
A.M. Best: A.M. Best noted that Swiss Re was able to successfully manage its risks because of its diverse portfolios. The agency argued for enhanced reserve monitoring and actuarial processes in an effort to mitigate the chances of reserve shortfalls in the future. Investing in advanced methods and sophisticated scenario analysis is important for future prospects.
Deriving Some Estimates of the Characteristics of Swiss Re in Isolation
These two adjustments clearly demonstrate that Swiss Re is working hard to meet its under-reserving obligations and simultaneously maintain its financial strength.
When the company earmarks additional funds in anticipation of newly observed market risks, it has been able to guarantee its future existence and build confidence to its stakeholders. However, the frequency of such changes seems to indicate that people expect better methods of risk assessment and prediction models.
The actions taken by Swiss Re are in order to improve the overall trust on an organization's reserves and plans for the future more specifically for the issues of risk management, and building up the target set of reclamation technique. This is likely to increase the level of confidence that the investors and the regulators have on such organization post such measures.
Investigations on the measures made by Swiss Re
Swiss Re’s actions towards reserve strengthen shows action dedicated towards under-reserving issue but also ensuring solvency accordingly. This assurance of stakeholders and future solvency has been driven by the provision of more funds to account for the newly observed market risks.
Nevertheless, these frequent changes indicate that there is a requirement for enhanced risk analysis and prediction solutions. Improvements in actuarial sciences, forecasting techniques, and scenario building are major areas, essential for strengthening the market position of Swiss Re (Swissre, 2024d). With enhanced understanding and analysis of complex data and by considering events of novel nature and significance, including climate and cybersecurity, risk, Swiss Re can further fortify its position for excellence as a reinsurer.
These measures demonstrate the commitment of Swiss Re to keep its stakeholders and regulators and grow in a volatile risk environment.
Comment on whether these recent reserve strengthening exercises are final or whether you would be more sceptical about future developments. If so, why? [15 marks]
The view relating to the recent Reserve Strengthening Operations’ last phase
The fact that the recently completed reserve strengthening process does not suggest that it would resolve the company’s issues or even the declare the issues as it’s Great Wall of China. This is particularly because, despite the Swiss Re’s exercises, economic/legal landscape changes add more configurations and new risks emerge that necessitate the ongoing reserve alteration actions on expected basis.
Swiss Re’s strategic emphasis on reserve enhancement is distinctly and appropriately financial and risk- management oriented. Nonetheless, these measures were intended as elements of a continuous and long-term process of changing in response to a rapidly evolving environment. In order to build and sustain organizational capacity and confidence, the company needs to expand the capability of using advanced data analysis, scenario, testing, and also innovative technologies.
Thus, recent actions are sound but do not discharge any future movements of adjustments. At the heart of it, Swiss Re has to be sensitive to changes in risk and able to recalibrate its reserves to remain competitive in the market. Such efforts are likely to facilitate the attainment of organizational stability and credibility of the company in future.
References:
Introduction Get free samples written by our Top-Notch subject experts for taking online Assignment...View and Download
Introduction: Gender and Sexuality in Society In the current competitive environment, gender and sex a major issues that prevail...View and Download
Assignment 1: Explain the role of marketing and how it interrelates with other functional units of an organisation Enhance your...View and Download
Essay: Effective Marketing Strategies for Business Growth Struggling with marketing strategy assignments? I needed Assignment...View and Download
Introduction: strategic change management assignment GPDOCS medical practice provides medical services in South London; to 15000...View and Download
Introduction Get free samples written by our top-notch subject experts by taking the Assignment Helper service from Rapid...View and Download
Copyright 2025 @ Rapid Assignment Help Services
