German reinsurer Hannover Re has reported that it achieved an inflation and risk-adjusted price increase on renewed business of 8.0% in the 1 January 2023 treaty renewals in traditional property and casualty reinsurance.
Hannover Re suggests that the market environment at the renewals was challenging for all, citing Russia’s war against Ukraine, sharply higher inflation and continued heavy losses from natural catastrophes, which in turn took a toll on the results posted by re/insurers.
However, the resulting stronger demand among primary insurers for reinsurance protection came up against a tighter overall supply.
This gave rise to significant improvements in risk-adjusted prices and conditions for reinsurers, says Hannover Re.
Jean-Jacques Henchoz, Chief Executive Officer of Hannover Re, said, “We had to take some conscious decisions on portfolio steering in order to respond to the market challenges.”
“As a result, we have achieved a durable improvement of the quality of our portfolio from which we will benefit in the long run.”
Of the total premium volume booked in the previous year on an underwriting year basis in traditional property and casualty reinsurance amounting to €15,543 million (excluding facultative reinsurance, ILS business and structured reinsurance), treaties with a volume of altogether €9,870 million – or 63% of the business – were up for renewal as at 1 January 2023.
Hannover Re renewed a premium volume of €8,494 million, while treaties worth €1,376 million were either cancelled or renewed in modified form.
Including increases of €576 million from new treaties and from changes in prices and treaty shares, the total renewed premium volume came in at €9,798 million, slightly below the previous year.
Adjusted for the sharp surge in inflation, the pricing momentum slowed in many lines of primary insurance, says Hannover Re.
Non-proportional reinsurance consequently fared better than proportional business, which is linked directly to the market development in primary insurance.
Hannover Re, therefore, responded by growing its non-proportional book by 21.4% in the renewals to a premium volume of €3,162 million.
The risk-adjusted price increase amounted to 20.7%. The firm states that after the vigorous growth recorded in prior years, proportional reinsurance contracted by 8.7% to €6,636 million. The price increase after risk adjustment came to 3.4%.
In the region Europe, Middle East and Africa the premium volume booked by Hannover Re rose 2.5%, despite share reductions or cancellation of some large proportional treaties.
The premium volume booked by Hannover Re in the Americas region rose 6.7%. Though further large parts of business in this region are not renegotiated until the 1 June and 1 July renewals.
In the Asia-Pacific region, Hannover Re reduced its premium volume by 21.6%. Here, too, market developments were driven by numerous large losses.
Meanwhile, in the natural catastrophe business, the premium volume booked by Hannover Re grew by around 30% in the 1 January renewals. Further growth is expected in the renewals during the year.
Prices and conditions improved sharply and in some instances to an extent not seen in decades, owing to the heavy loss experience of the previous year. Prices increased by an average of 30% on a risk-adjusted basis.