Swiss Re expects re/insurance prices to increase moderately and is wellpositioned to support clients on a sustainable basis

10 September 2012 Swiss Re

* Swiss Re expects moderately increasing re/insurance prices
* Low interest rates and new solvency rules are major factors influencing re/insurance pricing
* Underwriting expertise, based on strong Research & Development capabilities, is a key Swiss Re strength

An increased focus on economic capital due to new solvency rules and rising pressure
on investment returns from record-low interest rates are major factors driving re/insurance pricing, Swiss Re says at the annual Les Rendez-vous de Monte Carlo meeting. With prices expected to increase moderately, Swiss Re is prepared to support clients on a sustainable basis as well as to deploy more capital to those areas that offer the most attractive returns.

Group Chief Executive Officer Michel M. Liès says: "Our industry is facing a particularly turbulent economic and financial market environment. But our strengths as a well-capitalised company with unique expertise in underwriting and a demonstrated track-record in developing innovative solutions mean we are well placed to support them."

While traditional markets will remain the mainstay of Swiss Re's global business, selected high growth markets offer tangible opportunities for non-life and life solutions that can be seized through Swiss Re's unique combination of Reinsurance, Corporate Solutions, Global Partnerships and Direct Investment expertise.

Forces driving the re/insurance market
Re/insurance pricing is generally impacted by various factors: On the one hand, lower interest rates and higher solvency requirements point to firmer pricing, while low inflation rates, reserve releases and excess capital speak for lower prices. The particularly devastating earthquakes
in Tohoku, Japan, and Christchurch, New Zealand, in 2011, together with the extensive flooding in Thailand, serve as a reminder that pricing is heavily dependent on natural catastrophe experience in a given period.

Chief Executive Officer Reinsurance Christian Mumenthaler says:
"Upwards pressure on prices for (re)insurance is likely to rise, as low interest rates continue to depress running yields and drag return-on equity (ROE) levels down, significant reserve releases will not go on forever and solvency rules are tightening all over the world. In addition,
re/insurers' IFRS or US GAAP capital levels may appear inflated in an environment of falling interest rates due to the build-up of unrealised gains; this does not reflect economic capital levels."

Underwriting is a key differentiator
Swiss Re's Research & Development (R&D) is a true value driver in underwriting. Unparalleled mortality experience data in key markets, as well as a leading team of researchers, doctors, underwriters and actuaries provides Swiss Re with the ability to better quantify risks in
Life & Health. A proprietary model for natural catastrophes allows for comparison with commercial tools in order to understand the differences. Swiss Re can adapt its model quickly to incorporate lessons learned from past losses. By way of example, the recently launched Swiss Re Global Flood Zones™ tool helps Swiss Re to assess flood risks on a global basis.
In Casualty, Swiss Re is developing a forward-looking "nat-cat-like" model that is based on a systematic assessment of risk drivers.

Group Chief Underwriting Officer Matthias Weber says: "Swiss Re's underwriting expertise is a recognised differentiator in the marketplace and key to superior risk selection."
Opportunities identified in upcoming renewals Looking ahead to the 2012-2013 renewals, increased demand is expected for natural catastrophe capacity, frequency protection
covers, and capital relief transactions. Swiss Re also expects higher demand for external run-off transactions. The company is well positioned to support clients through innovative and tailored solutions.

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