Converium sees more rate rises after strong renewals

The hard reinsurance market is set to continue as companies carry on correcting for past undercharg...

The hard reinsurance market is set to continue as companies carry on
correcting for past undercharging, according to Dirk Lohmann, chief
executive of the Swiss reinsurance group Converium.


"I don't think all the the pain industry-wide has been fully realised,"
said Mr Lohmann as he unveiled Converium's 2002 results, which included a
$106.8m profit in 2002 following a $367.4m loss the year before.


He said that although increases in catastrophe line prices in the US had
levelled off, further increases were likely in other primary markets, such
as directors' and officers', medical malpractice and product liability
cover, which were still in crisis. Converium has managed to increase
reinsurance rates by 50-100% on some lines, said Mr Lohmann.


Converium's gross written premium (GWP) in 2002 was 22.7% higher than in
2001, at $3.5bn, and net written premium (NWP) was 33.8% higher at
$3.3bn.


Converium said that the improvement was largely because of a strong
performance in non-life underwriting, offset by reserve increases for
prior years of $148.5m net for non-life business, primarily in the US. "I
don't believe that we will see the same sort of levels coming through in
2003," said Mr Lohmann. "I took my lumps last year."


After re-underwriting and restructuring its non-life business Converium
ended the year with a non-life combined ratio of 104.2%, compared with
129% in 2001. The non-life NWP in 2002 was 34.7% higher than in 2001, at
$3.2bn.


Of the two-thirds of non-life premium up for renewal in January 2003,
Converium did not renew around 30% because it did not meet its "stringent
performance standards" or because it was restructured from proportional to
non-proportional treaties. "However, the non-renewed premium volume was
more than offset by new business," said Converium. Premiums on the renewed
business were 20% higher than the total volume up for renewal.


Converium Zurich boosted its NWP by 41% in 2002 to $1.7bn, with a 92.6%
non-life combined ratio. Aviation and space NWP was 104% higher at
$370.2m.


The largest growth by the Zurich operation was in liability, aviation and
space, and credit and surety lines. Rates for excess of loss business, for
example, rose by up to 500% last year.


Converium North America's GWP was 8% higher than in 2001, at $1.2bn, and
NWP 32.9% higher at $1.2bn. The loss of $57m in 2002 was down on the
$197.9m loss in 2001.


Converium Cologne made a $64.4m loss in 2002, compared with a $71.6m loss
the year before. GWP was 1.2% higher at $303.4m and NWP 12.4% higher at
$289.8m.


Converium Life made a $19.4m loss last year, after a $7.1m loss in
2001.


GWP was 20.8% higher at $199m and NWP up 18.8% at $168m.
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