Hannover Re anticipates a continuing trend towards higher prices and improved conditions in property and casualty reinsurance for the various rounds of renewals in 2022.
Along with the sometimes far above-average large losses recorded in past years, the recent flooding seen in Europe – a natural disaster on a historic scale – and the considerable losses caused by Hurricane Ida have further increased the need for action on the part of reinsurers. Pandemic-related costs and the low interest rate environment are an additional strain on the results generated by primary insurers and reinsurers. Inflation rates have also been rising of late in some regions. This has further heightened risk awareness among primary insurers and given an added boost to demand for high-quality reinsurance protection.
“In property and casualty reinsurance there is a need for further rate increases. Only in this way will reinsurers be able to provide reliable risk protection in an increasingly challenging environment,” said Jean-Jacques Henchoz, Chief Executive Officer of Hannover Re. “Particularly where natural catastrophe risks are concerned, adjustments are unavoidable. While the pace of price increases has slowed somewhat of late in the renewals during the year, this was primarily the case in areas where substantial increases had already been recorded in prior years.”
In the past rounds of renewals throughout 2021 Hannover Re has already been able to secure improved conditions and higher prices; nevertheless, further adjustments are needed against the backdrop of the multi-layered challenges posed by large losses, pandemic expenditures and the low interest rate level as well as the increasingly intense pressure on margins.
For the treaty renewals as at 1 January 2022 in property and casualty reinsurance Hannover Re expects the positive pricing trend to continue, especially in loss-affected lines and regions. At the same time, conditions are also likely to show further improvement on account of the considerable uncertainties, most notably in relation to future pandemics and cyber attacks.
Profitability in proportional reinsurance is satisfactory in light of sometimes marked price increases in the original market. In non-proportional reinsurance the available capacities continue to be adequate. Rates are holding steady or moving slightly higher worldwide.
Given the uncertainties prevailing on the markets, insurers continue to seek primarily high-quality reinsurance protection. This is where first and foremost reinsurers with a top-notch rating and particularly extensive risk-carrying capacity have a pivotal role to play. Thanks to its business model geared to partnership-based client relationships, its extremely robust capitalisation with a capital adequacy ratio under Solvency II of 250% (as at 30 June 2021) and its excellent ratings (“AA- ” from Standard & Poor’s and “A+” from A.M. Best), Hannover Re is able to participate disproportionately strongly in the market opportunities that are currently opening up.
“In addition to our customer-centricity focused on long-term partnerships, we offer a broad range of products and tailored solutions that encourage our clients to grow with us worldwide and across multiple lines of business,” said Sven Althoff, member of Hannover Re’s Executive Board with responsibility for property and casualty reinsurance. “In the current year and beyond this will be reflected in further profitable growth in the gross premium booked in property and casualty reinsurance.”