German reinsurance giant Hannover Re achieved average inflation and risk-adjusted price increases of 4.1% at the January 1st, 2022, reinsurance renewals, as the company grew its book by 8.3%.
Hannover Re notes the influence of considerable natural catastrophe losses on market pricing, especially in Europe and North America, alongside the low interest rate environment and higher inflation.
The firm reveals that of total premium booked in the prior year on an underwriting-year basis in P&C reinsurance of €13.8 billion, which excludes facultative reinsurance, structured reinsurance, and ILS, treaties with a combined volume of €7.8 billion, or 62% of the business, were up for renewal.
Furthermore, Hannover Re notes that the premium volume due for renewal has been adjusted for a reinsurance cession of roughly €1.1 billion received by the firm from HDI Global Specialty. The sale of the participation saw this decrease as planned to €576 million.
Disregarding the above, and a premium volume of €7.3 billion was renewed, while treaties worth €524 million were either cancelled or renewed in modified form, notes the reinsurer.
So, when you include increases of €1.2 billion from new treaties and from changes in prices and shares, total renewed premium totalled €8.5 billion, which is 8.3% above the prior year’s level.
By sub-segment, Hannover Re has reported that proportional reinsurance grew by 6.3%, producing a premium volume of €5.9 billion, with price rises of 3.4%. In non-proportional business, renewed premium volume increased by 13.5% to €2.5 billion, with price increases of 6.1%.
Jean-Jacques Henchoz, Chief Executive Officer (CEO) of Hannover Re, commented: “We can look back on a satisfactory round of treaty renewals with additional rate increases for the fifth year in a row, while further enhancing the quality of our business through active cycle management and improvements in conditions.
“In many areas the positive pricing momentum has been sustained. This is essential, also bearing in mind the continued low interest rates and substantial large loss expenditures. As a further factor, risk-adjusted price increases were clearly impacted by higher inflation rates.”
A look at Hannover Re’s Jan 1 experience by region, shows appreciable increases in premium volume and prices in Europe. In the Europe, Middle East and African (MENA) the premium volume booked by the firm increased by almost 10%, as losses from flooding in parts of Europe “overshadowed the pandemic as a defining issue.”
In the Americas, which includes North and Latin America, Hannover Re grew the premium volume book at 1/1 by 7%. Outside of loss-affected catastrophe lines, the firm notes that cyber covers saw the most appreciable price increases in the high double digits.
In Latin America, the reinsurer says that demand for coverage for natural catastrophe and political risks remained robust at Jan 1st.
And, in the Asia-Pacific region, Hannover Re grew its book of business by 8.2%, where the company notes stable reinsurance market conditions and stable or positive trending rates.
In Global markets, the German carrier saw significant increases, notably for natural catastrophe covers, adding that no appreciable strains from pandemic-related insolvencies have been recorded to date in the credit, surety, and political risks line.
Here, the premium volume increased by 11.2% at 1/1, largely as a consequence of the economic rebound in 2021 and the phasing out of government support packages.
Turning to natural catastrophe business, and Hannover Re achieved average rate increases of 6.6%, with double-digit gains in US and Europe catastrophe business. All in all, the premium volume grew by roughly 2.5% at 1/1.
In aviation and marine reinsurance, the premium volume book grew by just 0.8% at the most recent renewals. Against a backdrop of continued low flight activity, Hannover Re notes that primary rates are stabilising.
Hannover Re also grew its premium volume by 2.6% in agricultural lines, and says that it looks forward with confidence to further business opportunities in this part of the business.
In structured reinsurance, which is renewed throughout the year, Hannover Re anticipates growth of around 15% in 2022. And, in facultative reinsurance, Hannover Re notes that premium volume increased by roughly 11% at Jan 1 2022.
As well as its experience at the important 1/1 reinsurance renewals, Hannover Re has confirmed anticipated group net income of €1.4 billion to €1.5 billion for the 2022 financial year, adding that group gross premium should be at least 5% and the return on investment should hit at least 2.3%.
To reflect the higher retention and the higher loss expectation from natural catastrophe events, the reinsurer has raised its net major-loss budget for 2022 to €1.4 billion from €1.3 billion.
The reinsurer is set to report its Q4 and full year 2021 results on March 10th, 2022, but has today provided some preliminary key figures. This includes group net income of €1.23 billion, gross premium growth of 12.8% to €27.8 billion, and a return on investment booked from assets under own management to 3.2%.
However, the firm’s underwriting result was hit by higher than expected large losses and a prudent reserving approach in P&C reinsurance as well as further losses relating to COVID-19 in life and health reinsurance.
“Very high catastrophe losses and rising inflation came on top of the continuing pandemic last year. Despite this, we generated a respectable year-end result of EUR 1.23 billion that was in the upper range of our expectations.
“This underscores our resilience and performance capability and it gives me confidence that we will achieve the goals we have set ourselves for the 2022 financial year,” said Henchoz.