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Hannover Re posts 2.3% rate rise at ‘solid’ January renewal

5th February 2020 - Author: Charlie Wood

Reinsurance giant Hannover Re expects to generate net income of around €1.28 billion in 2019 and grew its premium volume in traditional property and casualty reinsurance by 14% at January 1 renewals, with the price increase for the renewed business amounted to 2.3%.

At 15.5%, the strongest growth in the renewals was seen from proportional reinsurance, which Hannover Re says generated a renewed premium volume of €6 billion. Prices here were up by 2.1%.

The renewed premium volume in non-proportional reinsurance grew by 9.7% to €2 billion. The price increase amounted to 2.9%.

Meanwhile, gross premium for 2019 increased to roughly €22.6 billion and the combined ratio deteriorated to 98.2%. above the targeted level of no more than 97% for the full year.

“The positive trend that emerged from the 1 January renewals should become more pronounced in the subsequent rounds of renewals during the year, not least because these also concentrate more on the loss-affected programmes”, Mr. Henchoz noted.

“With this in mind, we are confident of achieving all the goals that we have set ourselves for the 2020 financial year.”

Hannover Re expects group net income of around €1.2 billion for the 2020 financial year. Based on constant exchange rates, gross premium should grow by around 5% and the return on investment should be around 2.7%.

Of the total premium volume booked in 2019 on an underwriting-year basis in traditional property and casualty reinsurance amounting to €10.6 billion, treaties with a volume of altogether €7 billion – or 67% of the business – were up for renewal.

Of this, a premium volume of €6.3 billion was renewed, while treaties worth €1.6 billion were either cancelled or renewed in modified form.

Including increases of €810 billion from new treaties and from changes in prices and treaty shares, the total renewed premium volume came in at €11.5 billion.

On a regional basis, North America saw premium volume grow by19.5% in the 1 January renewals. Hannover Re says this was achieved both by further expanding the existing portfolio and by acquiring new customer relationships at broadly improved conditions.

Although losses from natural disasters – such as the fresh outbreak of California wildfires and hurricane Dorian – were lower than in the two previous years, considerable price increases were nevertheless obtained across large parts of the property portfolio.

Under loss-impacted programmes the price increases in non-proportional reinsurance reached double-digit percentages. In US casualty business prices improved against a backdrop of reduced capacities in the market.

In Latin America, the Iberian Peninsula and in agricultural risks surged by 35.1%, driven above all by growth in worldwide agricultural business. Loss-affected programmes, in particular, saw appreciable price increases.

Business in Germany, Switzerland, Austria and Italy grew by 5.9% and the premium volume from business in the United Kingdom, Ireland and the London Market grew by 22.1%.

Premium growth in Continental Europe amounted to 10.6%. Particularly under loss-impacted programmes the pricing level was better than in prior years, and here most notably in Northern Europe. At the same time generally stronger demand for reinsurance could be discerned across the entire region.

In Asia, Australia and the Middle East Hannover Re boosted its premium volume by 8.6% and substantially expanded its position with a number of clients at largely stable prices and conditions in various markets, especially China.

The premium volume in the credit, surety and political risks line was up by 8.6%, in part thanks to the acquisition of new customers. Market conditions were modestly improved.

In aviation and marine reinsurance the premium volume grew by 13.7% while the premium volume in natural catastrophe business grew by 7.8%, with price increases for the most part coming in lower than expected.

Despite higher additional reserves set aside for prior-year losses such as hurricane Irma in 2017 and typhoon Jebi in 2018 and further heavy loss expenditure incurred in the 2019 financial year from typhoons Hagibis and Faxai as well as hurricane Dorian, it was only possible to obtain stable prices and conditions overall as at 1 January.

“We can look back on a solid main renewal season that largely lived up to our expectations”, added Henchoz.

“Thanks to our very good position as one of the world’s leading reinsurers, we generated pleasing growth in our renewed portfolio at generally slightly improved prices and conditions.

“Nevertheless, it remains the case that the rate level for natural catastrophe covers in particular, and here above all in Japan, Latin America and the Caribbean, is too low and there is a need for further improvement.”

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