Some global market insights from Hannover Re;
Against the backdrop of a trend towards more expensive large losses, Hannover Re expects further price increases and improved conditions in property and casualty reinsurance.
The first half of 2022 proved challenging for primary insurers and reinsurers alike. Soaring inflation, major losses and an accumulation of mid-sized frequency losses were as much a factor in property and casualty reinsurance as pandemic-related expenditures were in life and health reinsurance. When it comes to new investments or reinvesting activities there will be a time delay before higher interest rates have a favourable impact.
Hannover Re continuously updates its inflation assumptions and includes these in its risk-adjusted pricing. Given that the inflationary environment is persisting longer than originally anticipated, due mainly to the war in Ukraine, additional adjustments will have to be made for future renewals. While the effects of inflation could already be felt in the previous year in connection with natural catastrophe losses, appreciable impacts are likely to be seen in other lines too going forward. When it comes to business interruption insurance, disruptions in supply chains are adversely affecting the availability of raw materials and construction materials, leading to longer repair times.
For the treaty renewals as at 1 January 2023 Hannover Re expects further price increases and improvements in conditions, not only in loss-affected lines and regions.
The capital adequacy ratio of Hannover Re in accordance with Solvency II amounted to 235.1% as at 30 June. Furthermore, the rating agencies attest to Hannover Re’s very good financial strength. The company is rated “AA-” by Standard & Poor’s and “A+” by A.M. Best. Both ratings have a stable outlook.
Specifically, Hannover Re anticipates the following developments in the treaty renewals as at 1 January 2023:
Europe
In the space of roughly a week, a series of powerful low-pressure areas named “Ylenia”, “Zeynep” and “Antonia” swept across northwest Europe and northern parts of central Europe in February of this year. According to the German Insurance Association GDV, the insured losses in Germany alone added up to around EUR 1.4 billion, making it one of the threemost severe winter storm events since 2002.
Insurance business in Germany has therefore already come under considerable strain in the current year due to catastrophe losses. In motor insurance the claims frequency – which had fallen in previous years owing to the pandemic – has largely normalised again.
In the area of cyber covers, the progressive march of digitalisation and sustained growth, in combination with more widespread cyber attacks, are leading to greater risk awareness as well as further price increases and improvements in conditions.
The primary insurance market in the United Kingdom and Ireland saw continued rate increases in 2022. While the potential for further price rises is limited in some liability lines, such as directors and officers insurance (D&O), rates in cyber business are still moving sharply higher.
Insurance business in France has once again been notable for exceptionally high losses from natural catastrophe events in the current year. From the end of May until early July, heavy thunderstorms in many parts of France caused hail damage to vehicles and especially residential buildings. According to the French Insurance Association FFA, the insured losses could reach EUR 3.9 billion.
In the markets of Central and Eastern Europe, the war in Ukraine had an appreciable effect on the region’s economic development owing to its geographical proximity. As a sign of solidarity with Ukraine, Hannover Re continues to stand by its Ukrainian customers even in these difficult times and is upholding its coverage commitments. Only a small number of loss advices have been received from Ukraine so far.
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