In a recent webinar, Hannover Re explored how the market conditions in Europe are currently challenging but are still expect to improve in 2021.
The reinsurer has predicted that, in Germany in 2021 there will be a lower growth rate in the primary insurance market in comparison to prior years.
The result of the pandemic has left the global economy in downturn and will be significantly felt in small and mid-sized enterprises.
Due to the COVID-19 pandemic, business in Germany has changed dramatically. As a result of the measures being taken to prevent the spread of the virus, there has been an increase in losses within business closure insurance, as well as event cancellation insurance.
On the other hand, the effects on business with private customers should be more limited to a certain extent, notes Hannover Re.
The need for the reversal of commercial and industrial property lines continues to grow more pressing on account of the burden of losses.
Despite the current economic climate, reinsurance conditions are expected to improve, particularly under loss-affected programmes.
As for motor insurance, due to a large reduction in traffic volume, claims are predicted to be much lower, ultimately giving insurers a temporary relief.
However, this is seen as a one-time effect and 2021 is expected to return to a usual loss expenditure with continued rising costs for spare parts and repairs, insurers and reinsurers alike have little margin for further improvements in conditions.
In the United Kingdom and Ireland appreciable market hardening can be observed among primary insurers.
Lloyd’s of London continues to adopt a more restrictive approach for selected lines as well as for syndicates that do not deliver profitable results, which resulted into an ongoing supply shortage. However, the market for contingency covers is showing significant rate increases despite pandemic exclusions.
The reinsurer has also predicted that France’s prices will be looking to increase on the primary insurance side. This can be attributed, among other things, to the continued decline in income from investments as well as the sustained level of claims expenditure.
At the same time, rising demand for industrial insurance covers is a further supportive factor.
This should also have positive implications for movements in reinsurance prices, not least in view of the additional strain here from large losses in prior years caused by run-off results that fell short of expectations.
In the markets of Central and Eastern Europe the pandemic has had an added adverse impact on what was already a challenging economic situation, even though no or only minimal COVID-19-related losses are to be expected from this region.
Hannover Re predicts the UK economy to bounce back over the medium to long term, with stronger growth rates in primary business in order to close the protection gap.