Global reinsurers Hannover Re sees the COVID-19 pandemic as having added further challenges to a reinsurance market already distressed by successive years of major natural catastrophe losses.
When it comes to property catastrophe business, this has resulted in an overall favourable trading environment for reinsurers throughout all renewals in 2020 so far.
Hannover Re notes how pricing momentum was particularly pronounced in territories and programmes that had sustained significant losses recently such as the US, Japan and the Caribbean.
Looking forward, Hannover Re expects continued upward pressure on US property cat rates, particularly for loss-impacted programmes.
The combination of losses and restricted capacities brought the market as a whole to a price inflection point in 2019. The environment is expected to show further improvement in 2021.
In Europe, Hannover Re noted a stable rating environment and in some instances improved pricing.
Material hardening is expected for 2021, particularly for those accounts that sustain significant losses from the pandemic.
Following the severe typhoons of 2018 and 2019 Hannover Re had already achieved significant price increases for Japanese wind and flood catastrophe reinsurance programmes in April 1.
Major reinsurers have used the recent events to update their risk models and hence their view of the Japanese typhoon risk and associated exposures.
Hannover Re says this is expected to lead to further substantial price increases in 2021 and should help bring about technical adequacy, the fundamental basis for reinsurers’ long-term support for this market.
With significant and repeated frequency losses in Australia in the last couple of years, there was considerable pressure to generate prices commensurate with the risks in order to improve terms in 2020, especially for aggregate covers and lower programme layers.
For 2021 Hannover Re expects this trend to continue for all natural catastrophe covers.
