Hannover Re has announced that it is anticipating stability in property and casualty (P&C) reinsurance renewal prices and conditions overall for the treaty renewals at 1 January 2019.
The German reinsurance giant acknowledged that the market environment continues to be challenging for P&C reinsurers, with rate increases lower than expected following the heavy catastrophe losses of 2017.
At the same time, it noted that capital resources available to most insurers are good, which is suppressing demand for reinsurance coverage, while the insurance-linked securities (ILS) market continues to provide considerable capacities, adding to the pressure on prices and conditions.
The company observed that results posted by some companies deteriorated sharply in 2017, while many reinsurers’ results in 2018 have also been impacted by follow-up losses from natural disasters.
Additionally, Hannover Re said that it expects to see diminished run-off profits and rising inflation driven in part by new trade barriers, which may increasingly pressure the reinsurance industry to implement rate adjustments in some segments.
Overall, Hannover Re considered the rate quality in the reinsurance market to have improved slightly year-on-year, remaining on a low but adequate level, with more appreciable mark-ups on loss-impacted treaties in natural catastrophe business.
“The further development of the loss amounts from last year’s hurricanes as well as the minimal large losses incurred in the current year to date will be crucial in determining prices in property and casualty reinsurance”, said Hannover Re’s Chief Executive Officer (CEO) Ulrich Wallin during a press conference in Monte Carlo.
“The lower the strains from catastrophe losses turn out to be this year, the more difficult it will be to push through requisite additional price increases in the coming year,” he added. “Nevertheless, we are seeing strong demand and hence rather favourable opportunities for growth in certain segments.”
Hannover Re said that, in particular, it expects to see increasing demand for reinsurance in the cyber space, as well as for solutions designed to provide solvency relief under structured reinsurance.
The company concluded that market conditions will likely need to improve due to an industry-wide softening in profitability and a higher burden of attritional losses, meaning prices are likely to remain stable despite the overabundance of reinsurance capacity.
