Global reinsurer Hannover Re expects further price increases in property and casualty reinsurance and improvements in terms and conditions in 2022, as heightened risk awareness drives greater demand for high-quality 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 (CEO) of Hannover Re.
According to Hannover Re, the sometimes above-average catastrophe loss experience of recent years, the severe flooding in parts of Europe in July, combined with the impacts of Hurricane Ida in the U.S., have further increased the need for action on the part of reinsurance companies.
At the same time, pandemic-related costs remain and coupled with the lower for longer interest rate environment, are an additional strain on the results of insurers and reinsurers. Inflation has also been on the rise in some regions, notes Hannover Re, which has heightened risk awareness among primary players and provided a boost to demand for reinsurance.
“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,” said Henchoz.
Throughout the 2021 treaty reinsurance renewals, Hannover Re notes that it has been able to secure both improved conditions and higher pricing, but emphasises that further adjustments are required as a result of the recent large loss years, pandemic-related costs, and low interest rates.
In proportional reinsurance Hannover Re says profitability is satisfactory in light of sometimes marked price increases in the original market. While in non-proportional reinsurance the available capacities remain adequate. Overall, Hannover Re says that rates are either holding steady or trending slightly higher worldwide.
Sven Althoff, member of Hannover Re’s Executive Board with responsibility for property and casualty reinsurance, commented: “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.
“In the current year and beyond this will be reflected in further profitable growth in the gross premium booked in property and casualty reinsurance.”
At the upcoming January 1st, 2022 renewals in Europe specifically, Hannover Re expects to see appreciable adjustments to conditions for property business in Germany, especially for catastrophe covers.
In the UK, the reinsurer anticipates further rate increases on the primary insurance market, although warns that on the whole they are not as marked as in prior years and vary according to the line of business.
The primary price rises seen in France are expected to slow somewhat as a result of lockdown-related improvement in the claims frequency in motor business and the uncertainty surrounding the strength of the economic recovery.
While in the markets of Central and Eastern Europe, the reinsurer expects growth rates in primary insurance business to pick up over the medium to long term.
In North America, Hannover Re notes that the primary insurance sector continues to see rate increases in virtually all lines of business.
“In view of the continuing economic recovery combined with the challenges presented by the pandemic, rising inflation and a steadily growing potential for losses from various lines, further rate increases and clarifications in the scope of coverage are essential,” said the firm.
In Latin America, the German reinsurer says that there’s an ongoing need for robust and well-structured reinsurance solutions to combat the current challenges facing primary companies, which are being driven by the growing exposure to natural catastrophes and social unrest.
For both the Jan 1st, 2022 and April 1st, 2022 reinsurance renewals in the Asia-Pacific region, Hannover Re expects to see stable reinsurance conditions and prices with more pronounced positive changes for those areas affected by the pandemic or other losses.
“New business opportunities are emerging on virtually all continents. In general terms, the purchasing habits of many clients have shifted in recent years towards holistic reinsurance solutions in response to the increasingly complex requirements placed on capital and risk management. This trend continues, prompting growing demand among customers for structured reinsurance solutions,” said Hannover Re.