The positive outcome of the treaty renewals in the current year was driven by the heavy losses from natural disasters in 2011. These prompted significant price increases, above all for loss-impacted programmes. The adjustments made to natural catastrophe models also played a part in the increases, albeit to a varying extent. The treaty renewals were once again influenced by the low interest rate level and the associated difficulties in generating sufficient investment income. As a result, the considerable discipline exercised with respect to technical pricing was sustained.
For the coming renewal rounds it is Hannover Re's expectation that the risk adequacy of rates will be sustained. All in all, further price increases should be attainable. The company continues to see stable or rising demand for reinsurance protection driven by a growing concentration of values in urban conurbations as well as by the implementation of risk-based solvency systems (for example Solvency II in Europe). The positive factors that have already shaped previous treaty renewals, including the adjustments made to natural catastrophe models and the low interest rate level, will again have a favourable effect on treaty pricing as at 1 January 2013 and will prevent market softening. Another crucial factor in the price trend will be the question of whether 2012 still experiences any sizeable natural catastrophes such as those seen in the previous year or whether the major loss experience remains as moderate as it was in the first half-year.