Hannover Re has noted that it anticipates further price increases and improvements in terms and conditions in the renewals at 1 January 2024 in P&C reinsurance, citing ongoing geopolitical uncertainties, increasing frequency and severity of natural catastrophe losses, as well as unchanged high inflation rates and social inflation as key drivers.
“Loss payments of insurers and reinsurers alike have consequently risen sharply and Hannover Re anticipates the long-standing trend towards higher expenditures to be sustained,” the firm added.
Jean-Jacques Henchoz, Chief Executive Officer of Hannover Re, commented, “We have achieved significantly more adequate prices and conditions during this year’s renewals. However, these improvements are not sufficient in view of the still challenging risk situation.
“Adequate pricing is a prerequisite for us to offer the best possible reinsurance capacity. As we want to grow with our clients and help closing protection gaps, we will also put an emphasis on innovation in order to allow our clients to transfer risks both through traditional reinsurance and tailored solutions.”
Hannover Re highlighted that extreme weather events took a toll on the insurance industry in Europe once again this summer.
“While southern Europe experienced a protracted heatwave with record temperatures soaring to almost 50 degrees Celsius, countries including Slovenia, Austria, Italy and Germany were impacted by heavy rain, windstorms and hail during the summer,” the reinsurer explained.
The firm said that the costs associated with the effects of climate change, combined with high inflation, added to the pressure for adjustments to prices and conditions.
Turning to North America, Hannover Re said the hard market phase in the region continues, especially in property business.
“Rising primary insurance rates, as well as adjustments to sums insured and retentions, are leading to further improvements in reinsurance premiums,” the reinsurer noted.
The firm continued, “The increasing frequency of mid-sized losses, which has been ongoing for years now, is particularly challenging for insurers writing business on a regional basis.
“Both in Florida and California regulatory challenges to necessary price adjustments have also led to a decline in primary insurance capacity.
“Coastal regions with rising insured values find themselves particularly challenged by the impacts of climate change. Combined with a higher frequency of mid-sized losses, the future profitability of the property and liability lines is therefore under pressure. In this respect, a continuation of the price increases can also be observed for loss-free reinsurance contracts.”
In China and India, Hannover Re said it secured better prices and conditions in the renewals during the current year, especially for non-proportional reinsurance treaties. Meanwhile, in Australia and New Zealand, the upward price trajectory was again maintained during the main renewal date as at 1 July.
“Flooding and windstorm losses in New Zealand gave added support to this pricing trend, in some cases leading to substantial adjustments,” the reinsurer said, adding that it also anticipates improved prices and conditions in the other Asian markets.
Sven Althoff, a member of Hannover Re’s Executive Board with responsibility for property and casualty reinsurance, commented, “Over the course of the year, we have seen increasing exposures from man-made losses.
“We expect this trend to continue, so that, amongst others, political or cyber risks will increasingly become the focus of future renewals. At the same time, we will keep an eye on the more frequently occurring secondary natural catastrophe perils.
“Thanks to our outstanding risk and capital management, we are optimally placed to reliably support our clients even in this challenging market phase.”