NEWS

More price hikes for Hannover Re

Inflation and the war in Ukraine will push further price rises in 2023.

“The world is becoming a less global space in terms of mindset,” Jean-Jacques Henchoz, chief executive officer of Hannover Re, told a Monte Carlo conference as he discussed the current reinsurance market and risks related to the Ukraine war among other things.

The reinsurer said it expected to see further increases in pricing in 2023, within the context of a trend for more expensive, large losses. The company also expected to see better conditions in property and casualty reinsurance next year.

Galloping inflation, major losses and an accumulation of mid-sized frequency losses made for a challenging 2022 for re/insurers. Hannover Re said that these issues were just as influential for property and casualty reinsurance as COVID-19 pandemic-related expenditures were in life and health reinsurance. Higher interest rates have yet to have an impact on encouraging new investments or reinvesting activities.

But the company said that these challenges are overshadowed by the war in Ukraine and the associated human suffering. It added that it is still too soon to make any reasonable estimate of the insured losses.

“The inflation rates in many regions are higher than they have been in decades. Combined with the war in Ukraine and given that the pandemic has still not been overcome, this is fuelling the long-standing trend towards ever-higher loss burdens for insurers and reinsurers,” said Henchoz.

“Further risk-adjusted rate increases in property and casualty reinsurance are therefore unavoidable. This is the only way for us, as a reinsurer, to continue to offer our clients reliable risk protection in an increasingly challenging market. In this context, an underwriting policy that emphasises quality is more important than ever if we are to preserve the profitability of our business.”

“The redundancy level of our reserves is very robust.”
Sven Althoff

The reinsurer said that persistent inflation, mainly caused by the war in Ukraine, means extra pricing adjustments will have to be made for future renewals.

Inflation has already hit costs around natural catastrophe losses and Hannover Re said that impacts are likely to be seen in other lines, such as business interruption insurance.

Improvements in conditions

The company expects further price increases and improvements in conditions at the 1/1 treaty renewals, and not just in loss-affected lines and regions. There are a number of reasons for rising primary insurance rates, which include inflation and loss experiences, so proportional reinsurance should benefit from that. There is considerably more ground to catch up in non-proportional reinsurance, and therefore relative improvements in pricing and conditions are needed, according to the reinsurer.

Sven Althoff, member of the executive board with responsibility for property and casualty reinsurance at the reinsurer, said that the company’s “excellent risk and capital management” meant that its “reliably high-quality risk protection is highly sought-after by our customers, especially in uncertain times”.

“Hannover Re is optimally positioned for the current market phase. Now, as before, the redundancy level of our reserves is very robust. In order to ensure that this remains the case going forward and in light of the increasingly challenging conditions, we shall continue to put great emphasis on the quality of the business written,” he concluded.

Main image: Shutterstock / non c