Hannover Re has added its voice to the growing chorus of reinsurers predicting ongoing rate increases at forthcoming renewal negotiations as increased risk awareness, a series of natural catastrophes and ongoing uncertainty stemming from the pandemic fuel demand for cover.
Speaking at a virtual press conference at the Monte Carlo Rendez-Vous, the German carrier’s chief executive officer, Jean-Jacques Henchoz, said it remained confident that a flight to quality and surging demand for protection would push property and casualty reinsurance rates higher for some time.
Combined with rates rising on the primary side, the executive said that all factors pointed towards increased prices and a subsequent hike in profitability as the industry moves to respond to the economic and natural catastrophe-linked volatility of the past 18 months.
“We expect a continuing trend towards higher prices in P&C reinsurance for the renewal rounds in 2022,” Henchoz said.
“In our view further rate increases are needed for reliable risk protection in what is an increasingly challenging market environment.
“Loss-affected accounts will likely see more pronounced firming of prices and terms, and we also believe that there will be further price increases in primary insurance, a trend which will translate into improved profitability in proportional reinsurance generally,” he explained.
“There are remaining discussions on the settlement of business interruption claims.”
Jean-Jacques Henchoz, Hannover Re
Reserves
The executive said that while the eventual loss tally stemming from the pandemic remained difficult to quantify, given that a number of complex claims are still working their way through the system, Hannover Re remained comfortable with its previous reserves set aside for the issue.
“There is a much lower level of uncertainty on the expected ultimate magnitude of the COVID-19 loss complex in P&C, but there are remaining discussions on the settlement of business interruption claims and some remaining uncertainty on potential long-tail exposures in this area,” he said.
“We nevertheless remain comfortable with our overall net reserving for these losses which has been stable since the end of 2020, with an overall amount of €950 million ($1.1 billion).”
Henchoz highlighted the losses from the severe flooding which hit large parts of Europe during the summer and the ongoing uncertainty on the eventual quantum of Hurricane Ida as key topics for discussions with partners next week.
He said while more precise loss estimates remained uncertain as claims continue to feed through into the market, both of these events were likely to be “significant” for the industry as a whole.
“In any case, so-called secondary perils such as flooding but also wildfires will be part of our discussions this week. Here the modelling impact and potential pricing adjustment will be part of the discussions,” he said.
“There is also heightened risk awareness among clients and business partners about the frequency and severity of natural disasters generally, and this will be at the core of conversations this week.
“This is also likely to trigger increasing demands for high-quality reinsurance protection to manage future volatility,” he concluded.
Main image: Shutterstock / NothingIsEverything
