Hannover Re’s German subsidiary, E+S Rückversicherung AG, has predicted further price increases and improved conditions in the 1 January 2024 renewals in property and casualty reinsurance, according to its comments at the 2023 reinsurance gathering in Baden-Baden.
Dr Michael Pickel, Chief Executive Officer of E+S Rück, commented, “We must assume that the multi-year trend towards higher claim payments will continue. Adequate prices are indispensable if we are to be able to offer our clients the best possible reinsurance capacity in the future, as we have in the past.
“Particularly at a time of many different interrelated challenges, it is therefore vital for us as a reinsurer to tackle these issues and design solutions jointly with our partners. Moving forward, then, we shall continue to stand by our clients as their partner in managing losses caused by climate change and natural catastrophe risks – just as E+S Rück has done for 100 years.”
Natural disasters along with high inflation have caused stagnancy in the German insurance industry this year, with the subsequent ongoing rise in reconstruction and repair costs continuing to impact its profitability adversely, and pressure to further adjustments.
The effects of extreme weather phenomena around the world and in Germany have caused the market to worry about the issue of coverage for impacts from these and the associated costs.
E+S Rück expects motor insurance to close heavily in the red this year. Average claims in motor insurance have again surged significantly in the current year, and the tariff adjustments made so far have failed to achieve the desired effects.
Dr. Pickel added, “Sharply above-average increases in the costs of spare parts and repairs as well as higher claims frequencies are causing massive losses and remain a heavy drag on motor insurers’ profitability.
“Against this backdrop, we take the view that adjustments to prices in motor insurance are unavoidable in the coming years to move out of the red and restore business to a profitable footing over the long term. We expect to see gradual progress in this respect.”
Losses under natural catastrophe covers were below average in the first six months but with summer storms “Lambert” and “Kay” considerable claims expenditure was incurred in August from a series of storms centred on southern Germany. With this background, 2023 is again expected to see substantial losses overall from catastrophe covers.
The sustained high rates of inflation and the trend towards adding natural peril covers to existing contracts will drive claims expenditures for the industry even higher in the future, according to the company.
Capacities in the reinsurance market remain tight overall, and demand for natural perils coverage is on the rise creating prime conditions for the prices for catastrophe covers to increase further.
High inflation has kept up the pressure for adjustments in industrial and commercial business, even though business interruptions due to supply chain bottlenecks are being normalised. The claims numbers and expenditures related to large fire losses have increased.
These developments should be reflected accordingly in modified scopes of coverage and conditions. In the liability line, it is likely that the discussion will be dominated by the issue of inflation as well as by the insurability of risks associated with so-called forever chemicals (PFAS).
With sharp price increases seen in past years, the capacities offered by players for cyber covers should result in price stabilisation on a higher level. With rising claims expenditures, however, the pressure to make adjustments remains. Controlling and limiting cyber accumulation scenarios have taken on added relevance, as is also evident in contract terms and conditions.
“Despite the challenging market environment, I am confident about the upcoming renewal round, because our customer relationships and thus also the upcoming negotiations are always characterized by a cooperative partnership with all market participants,” concluded Dr. Michael Pickel.
