Reinsurer Hannover Re has reported an average price increase of 5.5% on renewed business at the January 1st, 2021 renewals, as the firm booked premium growth in traditional property and casualty reinsurance of 8.5%.
According to Hannover Re, the pricing trend witnessed at 1/1 was driven by the substantial burden of large and frequency losses around the world, lower interest rates and uncertainty surrounding the ongoing COVID-19 pandemic.
67%, or treaties with a combined volume of €7.753 billion were up for renewal as of Jan 1st, 2021 for Hannover Re. Of this figure, a premium volume of €7.018 billion was successfully renewed, while treaties totalling €735 million were either cancelled or renewed in modified form.
Overall, the total renewed premium volume amounted to €8.414 billion for Hannover Re, which includes increases of €1.396 billion from new treaties and from changes in prices and treaty shares.
Proportional reinsurance witnessed growth of 8.3% at 1/1, generating a renewed premium volume of €6.329 billion. According to Hannover Re, prices here were up by 4.4%. The renewed premium volume in non-proportional reinsurance increased by 9.3% to €2.085 billion, with a price increase of 8.8%.
Jean-Jacques Henchoz, Chief Executive Officer (CEO) of Hannover Re, commented: “All in all, we can look back on a thoroughly satisfactory round of treaty renewals. The pricing momentum of the past year held up in the 1 January renewals. The sustained trend reversal in prices continues.
“We secured further improvements in prices and conditions to a varying extent across all lines and regions. Particularly in times of crisis, robustly capitalised reinsurers such as ourselves are highly sought- after.”
Taking a look at regional markets and Hannover Re notes particularly appreciable increases in North America and the UK.
In the Americas, which includes North America and Latin America, the premium volume jumped by 15.3% on the back of significant premium growth amid expanding customer relationships and hardening market conditions.
“Rate increases in primary insurance across virtually all lines as well as improved reinsurance conditions will have positive implications for profitability in the 2021 calendar year,” notes the reinsurer.
Looking forward, Hannover Re expects additional business opportunities for the remaining 2021 renewals as primary players increasingly look for high-quality reinsurance capacity.
In the Asia-Pacific region, the reinsurer slightly grew its premium volume with an increase of 4.1% at 1/1 while at the same time boosting profitability.
“The markets presented a very mixed picture during the renewal negotiations, with appreciable improvements in conditions not achievable on a consistent basis,” explains Hannover Re.
Premium volume for the reporting category Europe, Middle East and African (EMEA) grew by 10.6% at the key January 1st renewals. The firm notes that in Continental Europe it reduced its premium volume by focusing on profitable business. Demand for reinsurance cover remained high in this part of the world.
Turning to global markets, and Hannover Re underlines significant increases at 1/1, especially in aviation and marine reinsurance, which grew by 8.2%.
The premium volume in the credit, surety and political risks line increased by 5.3% as a result of the expansion of existing accounts and the acquisition of new customers. While conditions showed visible improvement.
In natural catastrophe business, Hannover Re notes that modestly improved prices and conditions were obtained. In U.S. natural catastrophe business price increases of around 10% were achieved, especially under loss-affected programmes, explains the firm.
In both structured and facultative reinsurance, the company notes stronger demand for high-quality protection.
Back in November, Hannover Re announced that it was reinstating a profit guidance for the current year, alongside a Group net income range of between €1.15 billion to €1.25 billion for 2021.
“The positive trend coming out of the 1 January renewals should be sustained in the subsequent rounds of renewals. The significant price increases that we are seeing in many lines on the primary insurance side will also gradually support rates in reinsurance business. We benefit from this directly through proportional covers,” said Henchoz.
Today, Hannover Re confirmed its guidance for 2021 and also revealed that this is based on the assumption that large loss expenditure remains within the envisaged budget of €1.1 billion.
The reinsurer is scheduled to report its Q4 and full-year 2020 financial results in early March. However, the company has provided preliminary key figures for the year, including group net income of €883 million for 2020.
At the same time, and again based on preliminary key figures, gross premium is expected to have grown by around 12% to €24.8 billion, and the combined ratio deteriorated to 101.6%, which is above the full-year target of no more than 97%.
“Our extremely robust result in the 2020 pandemic year shows that we can deal well with such extreme situations thanks to our diversified business model, our risk management and our capital strength. We are well placed to achieve our targets for the 2021 financial year,” said Henchoz.