Hi everybody and welcome to In Good Company. I'm Nicolai Tangen, the CEO of the Norwegian sovereign wealth fund, and today we are in really good company. We are here with Andreas Berger, who is the CEO of Swiss Re. Now, Swiss Re is a very interesting company. They basically insure insurance companies. We own 1.6% of the company or $800 million US. Warm welcome, Andreas.
Thank you very much. Thanks for having me.
So let's start with the simplest thing here. What does a reinsurance company do?
Well, you already said it. We are the insurers of the insurance companies. Some refer to it as the central bank of the insurance industry. Technically not 100% correct. So we are giving financial protection to insurance companies.
Why do insurance companies need to insure themselves? Insurance companies sit in a national or maybe also international context, but they need to protect their balance sheet.
And they benefit from our diversification that happens at global level. So we've got global diversification because risks are not correlated. But if you look at a standalone basis, then obviously the insurance companies need more capital for this, you know, so diversification helps.
Do you have to have a special kind of psyche to work with only risks and potential negative outcomes?
No. But I think the purpose, in particular also reinsurance, our purpose is we make the world more resilient. That resonates for people, in particular for me who grew up in so many parts of the world and I saw risks firsthand, coups, revolutions, other kinds of risks. And I started to think, what does that do, what impact does it have when you switch on the TV, everything that happens, how do societies deal with this? So I developed an interest in all of this.
Andreas, can we talk about the different types of risks that you insure? How do you split it?
Yeah, we focused on three business units. One is life and health reinsurance. So our insurance companies, life and health insurance companies are clients. Property and casualty reinsurance company, that's where the insurance companies sell property casualty, homeowners insurance, motor insurance, etc. Then we have a third unit that's called corporate solutions. There we insure corporates, large corporates who also have their own insurance companies, captives. So these are the three units and they have a very nice diversification benefit for the group. Life insurance is not correlated to P&C reinsurance, and within P&C reinsurance the two units are not directly correlated because corporate solutions reinsures externally. I'll give you an example: natural catastrophes, the capital return on a standalone basis for natural catastrophes is 8%. If you look at it at group level, it increases to 40%. So that's the diversification benefit that I'm talking about.
Let's start with natural catastrophes because we read about them in the paper every day. So what are the main catastrophes that you insure against?
We call it primary and secondary perils. Primary perils are earthquakes for instance, hurricanes. Secondary perils are more the frequency perils, floods, wildfires, you know, the likes. Those are secondary perils. In the last six consecutive years, the insured losses exceeded 100 billion. So that's about an increase of 5 to 7% per year. So we see really that the frequency increases but also the severity.
I think that's something to address. In 2024 for instance we had economic losses, those are all losses not only the insured, economic losses of 318 billion and 137 billion were insured. Why do we have more and more natural catastrophes?
People refer always to climate. That's one aspect that complicates things. But the main aspect is population growth. Population growth and with the population growth comes increased assets, cars, houses etc. And unfortunately always in the nicest areas and some of the nicest areas are very very much natural catastrophe areas. So that is the main reason.
If you split the two and we do climate first and then we do the population growth. So what is the climate impact you think on catastrophes?
So the primary reason is really population growth. I must say that because climate impact we always had that. So that's one thing to think about but the climate aspect is actually adding to it and you can see it in water, sea level rising or temperature rising. So what we do is we project into the future. We've got a data platform where you can create basically your digital twin of for instance a corporate company and their assets. We stress test them with all the events, hurricanes etc. And then we also do projections according to temperature rises. We use scientific models and that informs basically gives you insight, informs the severity or the resilience management you know in corporates but insurance companies but also in public entities. Those are the three customer groups that we service.
I listened to some of your podcast and you know in your firm you talk about severe convection storms the way I understand it and these convection storms are difficult to predict because they are very fast right and localized.
Yes they're difficult to predict but with our data platform and with the models that we then use with the projections we can anticipate some of it. Yes. But if not, there's always a way to mitigate and to prevent actions to mitigate. For instance, for floods, to build dikes, etc. You can see that, you know, $1 you spend on the mitigation saves you $10 for rebuilding after the event. So, that's a critical aspect in our business as well, not just to risk transfer to insure and reinsure, but also to help people prevent and mitigate.
What about things like wildfires?
Same story. Wildfires in particular in California, it's a known fact. So again, here you saw population growth in exactly those exposed areas. And there's a lot that can be done to mitigate maybe even prevent land use, building codes, right use of building materials. And you could see in the pictures also for the wildfires that happened in California in 2025 in January. You could see literally everything that burned down and then there were some houses that were not really impacted. So that is down to thinking about how do I build in order to mitigate something that I already know can happen.
So it's not an unforeseen event. When we look at the data and we look at the global warming and so on, I'm a bit surprised you are not emphasizing more deterioration in the climate situation.
No, I think Swiss Re was very vocal about this. But what I thought would be best to do now is to get from this meta level, the macro level, I would always call it from morality to materiality. To translate what we know from science into real life. That's why we need data. We need to connect basically the scientific findings with real life data from private households, public entities like municipalities but also for corporates and combine both.
Okay. So we have floods, we got fires, we got storms. So that's kind of the events. But then also more people want to live where these kind of things are happening. So what are the and so more people in Texas, we got more solar panels on our roofs. all these kind of things happening, right? So, how big is that effect?
No, I think the debate is now going really into concrete levels in particular at state level because it is a state problem and not really a federal problem. The federal level can help but what we do also with state levels, Texas is a very good example. We create exactly this data transparency. We ask them give us your data, your assets. We do this also in Australia for instance, in New Zealand concrete levels where levels of municipalities where we say let's gather the assets data put them really as a digital twin on their platform and then let's see what happens in Texas heat waves, drought, floods, heavy precipitation etc. You could really nail it down to a very singular level because it is the lat long that we address. You know, we just need the address, add a bit of information and then the digital twin is complete. That's not a complicated thing and the data is very often not really readily available. So we try to help people to organize data also in a more effective way.
What are the kind of things that you cannot insure anymore because of weather related risks? I'm thinking about, you know, housing in California, and other places because of flood and so on. Just what how does this work?
It's not an insurability problem. It's actually more than an affordability problem. If we don't take care of loss prevention, I think that's the important thing. We need to not only provide a balance sheet for risk transfer where people benefit from our diversification, but also we need to help people make use of our data, data analytics. We collected data for now 162 years. We're a data company and now with modern technology where we build data models etc. We can make our models natural catastrophe models readily available and then give insights how to prevent how to reduce actually the levels of threat that increases resilience. It's before you even think about insurance. So we need to refocus on the concept of ownership of risk. You cannot shift the burden when you build a house somewhere. That's your house. So you need to be informed about the geological situation what can happen in this area and this information is available. So that is our approach to say understanding awareness creation plus quantification step one. Step two is actually mitigation prevention and step three is then risk financing. One way is actually risk transfer insurance or reinsurance.
Do you think we'll see more cases where the government actually needs to own the risk?
Yeah. In some areas the problem is too big to be solved by one party. That's why we promote these public private partnership models.
And what what what are examples of these?
Examples are actually in areas where we say land use needs to be reassessed. Should people move into certain areas where it's almost predictable that catastrophes will happen. And there are good examples where New Zealand for instance has decided to relocate people communities. It's a tough decision but if you have the data and a common understanding that's a good way to address it. We have in the UK public private partnerships to address basically the flood problem. So the communities come together, the public entities come together and the insurance sector come together. There are investments into dikes etc. And then we can provide you know capacity otherwise insurance would be not affordable anymore.
Are there many places where you think well you know what we got enough risk here we don't want to take on more risk like New York how much risk would a company like yours have in New York if you add up all the real estate all the kind of things you have there?
No I think we have a capacity allocation model first of all we allocate capital and then the next level is obviously in our chief underwriting committee we allocate the capacity to the different types of products or risks lines of business as we call them. And obviously we need to see you know that we're not overexposed. We do accumulation controls and obviously that informs the level of capacity that we deploy to individual risks and then we deploy actually budgets to certain territories but also to certain lines of businesses then.
So that was the P&C but you also have other parts of the business.
Yes, we've got the P&C reinsurance business then obviously the corporate business. That's the second part. And then the third part is the life and health reinsurance business. I think maybe let's talk about the corporate business first and then because you were running that before.
I was running that before that is basically and and that had some problems in the past which you came in and faced.
Yes. Because equally like the P&C reinsurance business, it's also a volatile business. And again you need to see what diversification do you have in your portfolio? which risks do you onboard, take on your balance sheet and how do you want to grow in this type of business.
So so what what kind of risks do you have in that part of the business?
We insure basically the full range. We insure in corporates for their assets, for their liabilities, for transportation, also the aviation risks and sometimes we share it also with the reinsurance unit. So corporates, large corporates and upper middle market corporates are our customer base. We're not in the retail business. So we are typically a B2B business-to-business business where you have professional buying centers working together. So we provide also structured solutions, risk financing solutions for captive insurance companies that are owned by corporates. And here again our data models are being used and our capacity are being used and we provide worldwide cover for international insurance programs we call them you know where corporates steer their risk globally for all assets in the world centrally and they need a partner who can actually respond to the needs on the service side but also help to structure it. It's a complex business.
And what was the problem here in the past?
The problem was that we had outsized positions in certain type of areas. For instance, in US liability and the large corporate risk space in the US liability was very exposed to a lot of losses and that is something where we were overexposed more than 50% of our business was in the US and 90% of all liability business was also in the US. So we had a concentration there and that was hurting us.
And what so then they brought you into fix it and what did you do?
We basically reset this business unit. We said what are we talking about? Who is actually the customer and what do they actually need from us? Where do we have differentiating assets that we can deploy to the customer where the customer also values Swiss assets. So risk insights leading programs lead capabilities. You need to have the right risk engineers, the right underwriters who can do that and also the right claims handlers who can do that. And today we have a very clear proposition. We're not everything to everyone. We focus on a specific customer segment. We have reduced the longtail business and have now a very healthy book of non-correlated lines of businesses. When the property cycles go down, we definitely have credit insurance. that was counter cyclical that helped us actually produce our results but also if you look at the customer feedback they value what Swiss Re stands for on the reinsurance side equally also on the corporate side. We're one of the few late entrances in a small group of insurance companies it's the international insurance program space but it's also alternative risk transfer where you look at finding alternative risk financing structures for corporates, complex structures. Not everybody can do that. So if you look at numbers in this space, you probably deal with eight to 10 competitors in the international program space and then if you go into normal placement there, you deal with hundreds or more competitors. So that differentiation helped us to manage basically also the outcome.
Your last part is the life side. How does the new types of obesity anti-obesity drugs impact this division?
Yeah. So we have the leading life and health reinsurance company in the world and we have something that's called Life Guide. There we collect all the information that we make available to underwriters for primary insurance companies about certain type of diseases. It's almost like a medical handbook. With AI, we add AI basically and we augment the offering on this Life Guide side. So obesity and all the specific aspects of it obviously are entered into our model and into our assumptions obviously and we had this debate around COVID you know what was the reason the causality for these spikes that we could see after the core event of COVID yeah so the late reporting of claims and we had in I think it was in 2023 in Q3 if I remember correctly we had a spike coming through from the US and we were scratching our heads and we say why is this happening in the US in particular in the age group of middle-aged people because in all OECD countries you didn't see that spike and that causality needed to be understood people asked is this obesity, is this use of drugs? Is this cancer? Because interestingly it went through all social groups. So there's a lot of research that's happening there. Not all answers have been found. But I think that's something really when we need to dig very deep because we exposing our balance sheet and we need to put you know the expectations into our costing into our pricing ultimately also and if you don't get it right you expose yourself for a time period of 30 40 sometimes 50 years. Yeah. That's the duration of those contracts. That's why that granularity of understanding is very important.
What are some of the new issues that you need to think about in terms of whether you can insure them or not?
How does insurance work? You need data. You need data and you need to start to model. You need to understand the data. Let's take one risk where cyber as an example. It is a common event. But if you go out and ask people tell me what your worst case scenario is then you get a lot of answers also the deep understanding of the cyber exposures is not good enough yet.
Can we fully insure against cyber I mean could we with our wealth fund come to an insurance company and totally insure against cyber so that if somebody stole our money we would get it back from you.
Yeah, it's really it starts with the understanding of the exposure. Yeah. And that is something that where we have to work together and that's the most critical piece. Why don't you get so many so high limits? Because insurance companies are reducing their exposure by offering smaller limits because we don't know actually what the worst case scenario actually could look like.
Mhm. So you you cap your exposures for each case.
Absolutely. Yeah. And we have capacity limits and we have risk limits in our company also and that's very important to measure these.
What about AI? So we make some AI models in you make some AI models in a firm. It goes totally ballistically wrong big losses. How can you insure that?
Yeah. So that's a new area and I've been talking about this for quite some time even before the big hype of AI because what's happening people work with data and data has biases too and then the algorithms come in and by the way software programs have the same you know so the malfunction of algorithms or software programs is a topic that we need to really get a better understanding for. In our company the AI governance and the framework for the digital use of data in business is strongly regulated. So we always have the human in the loop. We don't allow AI to take decisions for the humans and we have this dilemma and managers have this dilemma. There's this excitement but then there's also the risk.
My understanding is that you have two levers to move when it comes to pricing. You got the pricing right. So prices up by 3%, 5%, 7%. But you also have the exclusion element, right? So you can cap your exposures and you can just exclude things from what you cover. How tell us about this exclusion thing and how that works.
Well, usually when you have an exposure in AI for instance or algorithm malfunction etc. It can span across various type of covers that are existing today. And cyber happened started that way because you had a typical property insurance cover or something that we call non-damage business interruption because property covers usually were triggered when there was a fire. Yeah. Or explosion. But the non-damage exposure and physical damage exposure I think that was new. And through this the cyber exposures were creeping into traditional covers and that's something that was not intended when the cover or the contract was established and that's why as it grew as an exposure the industry more and more came to the conclusion we need to actually exclude it understand it and then as we understand it and if have a grip around it then we need to have a separate cover for this so you can buy now separate cyber cover instead of integrating it into a property or non-damage business interruption cover.
But but these things are become it's becoming more and more complicated right and so what we see I read in the paper recently is that more and more of these settlements are ending up in court how do you see that development?
I can't confirm that we have many many more verdicts but there are disputes yes because there's a dispute around what was the intent when the contract was created and then what's the exposure you know the new exposure the emerging exposures are they included are they not included that I think that's the typical debate that you have but that's normal in particular in the B2B world it's normal. When it comes to households to private customers personal lines or businesses their clarity of cover is very important because it's a consumer protection aspect with companies that negotiate with reinsurance companies or insurance companies. There you have two professional buying centers. Both are pretty sophisticated and there it comes down to also contract certainty is very important and that's why not only the price is important but actually as you said the terms and conditions.
So we we talked now about your three areas and how they and they kind of cancel out each other to a certain extent. So not you know some pretty kind of potentially stable results from you. Now the way I the way I understand this business and the cyclicality of the business is that you have some years with big losses.
Afterwards prices go up and when prices go up it's really profitable. So then you get more capital coming in competing prices down back again. How do these cycles work?
First of all there's not only one cycle. It's very important to note each product each line of business as we call it has a different cycle. So when a cycle a rate environment is declining in property or natural catastrophe insurance there are other lines of businesses that are not correlated to that and I think that's what we observe. We look at our total portfolio and we call it the target liability portfolio. We have a five-year forward-looking view and we assume developments, rate developments, but also inflation etc that all comes in and then we see how does my portfolio behave and if there's one cycle that goes down I probably will not grow in that area so much anymore. So I limit capacity deployment to that area. And then I have focused growth ambitions in other areas that are not correlated with that are not going down. And that's the cycle management. And it's important to understand the behaviors of players in each part of the cycle that a line of business is in.
Who are the big players in reinsurance?
We have the top three lead reinsurers we always call them. You could say the top five. The top five have something around 46% of the market share. The top three have some.
So it's Munich Re, it's you,
Munich Re, Hannover, and us. Then SCOR as a next one. And then you have also the second tier ones as we call them. So 31% roughly the top three, 46% top five and the top 10 have roughly 70% of the market share. So the top tier one are the lead reinsurers. Primary insurance companies need lead reinsurers for long-term stability, strong balance sheet, highly rated balance sheets and long-term commitment and also those are able to offer whole account views. Then you go into the next second level ones, you find a lot of Bermudans in there. And then you have the third tier companies which are situated in Bermuda. And it was a growing segment, the tier 2 segment. And then you've got smaller companies, reinsurance companies, very often departments of primary insurance companies who opened up a reinsurance company. Those are sometimes the tier three ones.
Yes. So let's say now after this meeting I come out and feel really inspired and wow reinsurance company reinsurance business that's just the greatest thing we should start to do that with part of the fund that we have what do we need to do I mean what what are the skill sets that you need to have to start every insurance company?
So first of all you need to focus on what do you want to be and who do you want to be to service what's your customer base if you say well we want to be a big player and make a lot of money. Okay. So I would say let's talk about the capabilities first. So you need the diverse spectrum of all capabilities that you can have. It's a multidisciplinary approach. We have scientists, physicians, we have engineers, we've got mathematicians, actuaries, we've got lawyers, business administration. So.
Yeah, weather forecast the full spectrum.
Yes. Exactly. The full spectrum. Yeah. Chemists and the full spectrum we have. Why? Because the exposure and the risk pool is so diverse. And to get a good understanding of all the aspects of risk, we need this diversity. And if people are very curious, this is an industry to be in. So risks are diverse. When you switch on the TV, Nicolai for instance, and you see the watch the news, every aspect of the news has to do with reinsurance. So for me, it's super fulfilling. Yeah. So we are operating.
