NEWS
Hannover Re has warned on rates
It will return cash to shareholders if market conditions do not match the risk, says CEO Henchoz.
In the context of a “dire” risk environment, where the list of increased global risks only keeps growing, Hannover Re’s chief executive officer issued a stark warning to the market and its clients on the consequences of rates and terms and conditions falling below par—it may have to return cash to its shareholders.
“These considerations about the global environment need to be in the market discussion,” Jean-Jacques Henchoz said in his opening speech at the company’s annual press conference at the Monte Carlo Rendez-Vous.
“If there is a meeting of minds, then I am quite optimistic about the outlook for 2024 and beyond. We have the necessary capital base, and I see a growth opportunity for us in many parts of the world and in many lines of business.”
What is more, he suggests, Hannover Re could grow faster than the market overall—it has the capital to do that.
But if market conditions fall short “the alternative is to give the capital back to our shareholders and increase the dividend”, Henchoz added.
That bar could be set high as, he admits, he brought a rather stormy view to sunny Monte Carlo. The risk environment is, by his own admission, “quite dire” and it remains “difficult to find a positive trend looming”.
“The trend in natural catastrophes makes it hard to define any positives,” he said. Events over the past year by image, by number, and by insured loss have only intensified arguments building up year by year.
“Society is in denial about the price of risk.”
Jean-Jacques Henchoz, Hannover Re
“Climate change is a clear driver of change that has obliterated the line between peak and secondary perils,” he added.
Outside of nat cat, aggregation and accumulation risks are no less ominous. Trends in geopolitics, by no means just the war in Ukraine, undermine the free trade that supports both wealth and re/insurer diversification.
“In US casualty, litigation financing is an active counterweight to any attempts to close the protection gap and requires us be very conservative in our steering,” he said.
Across it all, inflation remains a threat requiring repricing up and down the value chain.
“It hurts in terms of consumer acceptance, and we understand that, but we cannot ignore it,” Henchoz said in his message to markets on pricing.
“The reality of today’s world is that the price of risk is increasing, and the issue is that society generally needs to come to terms with that,” he said. “Society is in denial about the price of risk.”
Property to trend up
Heading down the road towards 1/1, Hannover Re expects the North American property market to “trend up” as rising loss activity multiplies with rising exposure volumes and the impact inflation has on their valuations and replacement costs.
“That will meet a market that is still very disciplined,” Sven Althoff, Hannover Re’s chief of P&C reinsurance, said. “From that point of view, we are very positive here.”
“US casualty is certainly in an upward trend.”
Sven Althoff, Hannover Re
It is a bit more jittery in US casualty where the reopening of courts put verdicts back on a discouraging long-term trend—or worse.
“We will wait to see if this is just a catching-up or if we are dealing with an acceleration,” Althoff said. “US casualty is certainly in an upward trend in our minds”.
Cyber is benefiting from “considerable work” on underwriting terms and conditions and Althoff speaks predominantly to the long-term growth story into a never-ending market space.
“Price and terms and conditions will remain relatively attractive,” he said, acknowledging a “healthy risk appetite” and “the room to do a little more”.
Elsewhere, London Market and specialty lines are getting updraft from geopolitical tensions that could move rates in SRCC, marine and aviation and more. New angles towards aggregations in those lines, inflation and loss history are all likewise supportive, Althoff added.
Credit & surety is “slowly but surely” getting back to the long-term averages seen before the COVID-19 pandemic created an era of relief.
Main image: Shutterstock / jakkapan
