Hannover Re, Swiss Re, Munich Re and SCOR all experienced weaker-than-expected January/April renewals despite an impact of more than $100 billion from natural catastrophes in 2017, according to Deutsche Bank.
Deutsche Bank’s outlook has subsequently turned more cautious towards European reinsurance, taking a neutral stance from its previous positive view in October 2017.
The firm had expected an increasing pricing momentum until July 2018, with a spillover effect feeding well into 2019. Overall, it had expected prices to increase to 2015 levels following the impacts of 2017 catastrophe losses.
On a sector level, Deutsche Bank indicated that combined January/April renewals were at or slightly ahead of original expectations, with stable pricing ahead.
Overall, pricing momentum is expected to firm, as July renewals should reflect the highest share of loss affected lines. Deutsche Bank suggests that feedback from its N.Y. financials conference was mixed in that respect.
While all reinsurers were in agreement about some price improvements in loss affected lines, the tone around potential improvements sounded more downbeat than originally hoped for.
Deutsche Bank has therefore lowered its price expectations for July renewals to the level that companies have reported so far for January/April.
This suggests that Munich Re could be at the low end of the range with c.1% reported/ 2% adjusted for interest rates and 3% at SCOR at the high end, according to Deutsche Bank analysis.
Looking beyond 2018, Deutsche Bank sees a dimmer pricing outlook and has subsequently cut its 2019 and forward price expectations by 25 basis points – effectively increasing its combined ratio estimate for the sector.