INTERVIEW: KLAUS-GREGOR HAHN, DEUTSCHE RÜCK
Deutsche Rück CEE market head sees 1/1 opportunities
The reinsurer is optimistic about renewal price increases and believes that underwriting discipline is to continue.
“We have one of the most interesting situations I’ve seen for years and that’s good motivation for the coming renewal,” Klaus-Gregor Hahn, market head Austria/Central and Eastern Europe (CEE) at Deutsche Rück, told Baden-Baden Today as he discussed the 1/1 2024 renewal, the ongoing hard market and the German reinsurer’s recent performance and expansion plans.
Premiums have reached a level that was driven by inflationary development in the lines of business covered by Deutsche Rück, which is mostly property & casualty, Hahn says.
Such price increases have enabled the company to manage expected loss inflation on its CEE portfolio. “We believe that the markets will remain hard, as exposures are growing and inflation is still widespread.”
He adds: “We are optimistic we will be able to cope with this challenging market situation.”
Upward pressure on prices is coming from the ongoing demands for an adequate return on risk-adjusted capital (RORAC) from reinsurers, their investors and shareholders, he says. And of course, investors expect higher returns from reinsurers when risk-free interest rates increase.
“What makes us optimistic is that we believe underwriting discipline is unchanged in the markets, and that it is key.”
“Capacity is available, so we’re unlikely to see the scramble for capacity witnessed at the previous 1/1, especially on the retro markets,” Hahn says.
“Reinsurers are being very careful and looking at where they deploy their capital and capacities.”
“Exposures are growing and inflation is still widespread.”
Klaus-Gregor Hahn, Deutsche Rück
Well ahead of the plan
Deutsche Rück is in a good place to make the most of such a market as, Hahn says, 2023 has been okay so far, even though the firm experienced some significant nat cat losses. The reinsurer is “well ahead of the plan” for 2023 and has seen significant growth on premium volumes this year, he says.
The forecast for 2023 growth of the Deutsche Rück Group, which includes Deutsche Rückversicherung AG in Düsseldorf and the reinsurer’s subsidiary DR Swiss in Zurich, is that gross premiums earned will increase from €1.5 billion ($1.6 billion) to just under €1.7 billion for the group.
“What has helped is that we successfully realised our expansion strategy in new markets in the Middle East, Latin America and Asia. So far, this has proved to be a very successful step, as well as benefiting from the hardening market in the renewals throughout 2023,” Hahn says.
At September’s Monte Carlo Rendez-Vous, Deutsche Rück revealed to Intelligent Insurer that it would be taking its first steps into the life segment outside Germany as a part of the company’s ongoing diversification and expansion strategy. The plan will see the reinsurer start writing life business in the Middle East and North Africa next year.
The decision follows on from the company’s positive experience of writing new business in South, South-East and East Asia where it entered several select markets in January 2023.
“What makes us optimistic is that we believe underwriting discipline is unchanged in the markets.”
ESG challenge
The importance of environmental, social and corporate governance (ESG) measures to help address especially climate change is well understood across the re/insurance industry, according to Hahn.
“The authorities want to make sure that insurers are striving to contribute to ESG issues. At Deutsche Rück we’ve increased staff numbers to establish a team especially for ESG.
“All participants need to be careful, be it the authorities, governments or us as an industry and our associations. We need to make sure that there is no over-regulation. No one should complicate things too much,” he says.
On the subject of accurately identifying the impact of climate change on nat cat losses, Hahn says that when re/insurers assess an event it’s not always clear whether a flood loss or a windstorm is a consequence of climate change.
“It is a real challenge to find out whether something is an extraordinary case of a nat cat loss or not. We have to deal with both,” he concludes.
Klaus-Gregor Hahn is market head Austria/CEE, at Deutsche Rück. He can be contacted at: klaus-gregor.hahn@deutscherueck.de
Main image: Shutterstock / bear_productions
