Swiss Re Has Proven to Be a Superior Underwriter With a Focus on Stronger and More Specialist Lines

For almost a decade, Swiss Re has been missing its stride. Yet we think this is a top-quality business with some unique assets. More than any other European reinsurer we cover, Swiss Re puts research and development, data and technology, customer relationships, analytics, and insights front and center when trying to carve out a pure underwriting-based competitive advantage. It has delivered the leading property and casualty claims ratio by a minimum of 1 percentage point under IFRS 4. Whether the business is delivering superior underwriting under IFRS 17 remains unclear. We think it operates with strong natural catastrophe underwriting skill sets, driven by its proprietary risk models and collaboration with leading scientists. Barriers to entry are high because of potential losses, should a business fail to properly underwrite. A new entrant's entire capital base could easily be wiped out. That entrenches Swiss Re with customers, enhances trust, and increases switching costs.