Summarizing the trends generally seen at the latest renewals, as well as its own experience in various territories and lines of business, the German reinsurer has released its forecast for the industry evolution in the remaining months until year end and next year as follows.
Briefly, the main conclusion with regard to the current status of the market is that "the market environment in worldwide property and casualty reinsurance remains challenging," characterized, among others, by a fierce competition both in the primary insurance markets and reinsurance. Thus, despite the enormous natural catastrophe losses of the past year, prices have increased less than expected in affected regions and programs, while in the loss-free programs, rates are stabilizing after being already at a low level. "At the same time, the capital resources available to most insurers can be described as good, as is also reflected in retention levels. These are still high, suppressing demand for reinsurance coverage. The ILS (insurance-linked securities) market also continues to provide considerable capacities, adding to the pressure on prices and conditions," HANNOVER Re adds.
"The further development of the loss amounts from last year's hurricanes as well as the minimal large losses incurred in the current year to date will be crucial in determining prices in property and casualty reinsurance", CEO Ulrich WALLIN commented during a press conference in Monte Carlo. "The lower the strains from catastrophe losses turn out to be this year, the more difficult it will be to push through requisite additional price increases in the coming year. Nevertheless, we are seeing strong demand and hence rather favorable opportunities for growth in certain segments."
In Europe, the primary insurance the market continues to be shaped by surplus capacities. Reinsurance markets consequently also remain fiercely competitive, even though prices are more stable than in the previous year. Most notably, covers for risks in the fire, industrial and motor insurance lines are seeing sustained intense competition.
Motor insurance markets are increasingly competitive, with MTPL average claims amounts increasing while claims frequency continues to decline, but at lower pace than in the past years. The influence of telematics tariffs and developments relating to self-driving vehicles on the market as a whole continues to be assessed as relatively slight.
Growth rates in the countries of Eastern Europe, on the whole, continue to be higher than the overall European average. This is true of both the primary and reinsurance market. New rules governing compensation for relatives will lead to further premium hikes in motor insurance. The brisk demand for top-quality reinsurance solutions remains undiminished across the entire region. Key drivers here include tighter requirements placed on insurers' capital resources by Solvency II as well as more rigorous regulatory oversight and anticipated changes in accounting principles. Despite intense competition, sizeable growth opportunities can be expected in Eastern Europe over the medium to long term - against a backdrop of continuing broadly adequate reinsurance prices and conditions.
Looking ahead to 2019, further promising possibilities should open up. Along with the opportunities arising out of digitalization, demand for coverage of cyber risks - not just from large corporations but now also from SMEs - is on the rise. Similarly, business in the Asian growth markets (China, India) should also present some openings. Structured reinsurance offers further scope for growth in covers taken out for capital relief as a consequence of the implementation of risk-based solvency systems.
In the present climate Hannover Re will stay focused on its core competence: traditional reinsurance, supplemented by individual coverage concepts such as product-oriented cooperation arrangements with primary insurance customers"The positive future prospects for the global reinsurance market are the cornerstone of our success over the medium and long term. With this in mind, we are concentrating quite deliberately on the products and services typically associated with a reinsurer", Mr. WALLIN asserted. "We have no doubt that this is the right course to pursue when it comes to generating sustainable value for our clients, our shareholders and our employees."
Hannover Re considers itself well on track to achieve its 2018 year-end targets. Based on constant exchange rates, the company anticipates an increase of more than 10% in its gross premium volume and net income in excess of EUR 1 billion for its total business. This is conditional upon major loss expenditure not significantly exceeding the budgeted level of EUR 825 million and assumes that there are no unforeseen distortions on capital markets.
The full press statement released by Hannover Re on the occasion of the Monte Carlo event is available at https://www.hannover-re.com/1337839/monte-carlo-2018.