"In property and casualty reinsurance there is a need for further rate increases. Only in this way will reinsurers be able to provide reliable risk protection in an increasingly challenging environment," said Jean-Jacques Henchoz, Chief Executive Officer of Hannover Re.
Along with the sometimes far above-average large losses recorded in past years, the recent flooding seen in Europe and the considerable losses caused by Hurricane Ida have further increased the need for action on the part of reinsurers.
At the same time, pandemic-related costs and the low interest rate environment are an additional strain on the results generated by primary insurers and reinsurers. Inflation rates have also been rising of late in some regions, as the reinsurer mentioned, increasing the risk awareness among primary insurers and providing an added boost to demand for reinsurance protection.
"Particularly where natural catastrophe risks are concerned, adjustments are unavoidable. While the pace of price increases has slowed somewhat of late in the renewals during the year, this was primarily the case in areas where substantial increases had already been recorded in prior years", said Jean-Jacques Henchoz.
Thus, for the treaty renewals as at 1 January 2022 in property and casualty reinsurance Hannover Re expects the positive pricing trend to continue, especially in loss-affected lines and regions. At the same time, conditions are also likely to show further improvement on account of the considerable uncertainties, most notably in relation to future pandemics and cyber attacks.
"Profitability in proportional reinsurance is satisfactory in light of sometimes marked price increases in the original market. In non-proportional reinsurance the available capacities continue to be adequate. Rates are holding steady or moving slightly higher worldwide", as the reinsurer mentioned in a statement.
Particularly, for the CEE markets, Hannover Re notes it expects growth rates in primary insurance business to pick up over the medium to long term, while for the other European countries Hannover Re expects to see:
- appreciable adjustments to conditions for property business in Germany, especially for catastrophe covers.
- Further rate increases on the primary insurance market in the UK and Ireland, although on the whole they are not as marked as in prior years and vary according to the line of business.
- In France the price increases seen on the primary side are expected to slow somewhat. Among other things, this is due to the lockdown-related improvement in the claims frequency in motor business and the uncertainty surrounding the strength of the economic recovery.