Prices and conditions ’not seen in decades’ was present at 1 January
Hannover Re has revealed it achieved an inflation- and risk-adjusted price increase on renewed business of 8% in the treaty renewals as at 1 January 2023 in traditional property and casualty reinsurance.
While rates hardened substantially, it was a challenging renewal, according to Jean-Jacques Henchoz, chief executive of Hannover Re.
The German reinsurance giant renewed a premium volume of €8.5 billion, while treaties worth €1.4 billion were either cancelled or renewed in modified form. The total renewed premium volume came in at €9.8 billion, slightly below the previous year.
“We had to take some conscious decisions on portfolio steering in order to respond to the market challenges,” he said. “As a result, we have achieved a durable improvement of the quality of our portfolio from which we will benefit in the long run.”
Inflation and nat cat losses shape dynamics
The market environment for the renewals was very challenging for all participants. Russia’s war against Ukraine, sharply higher inflation and continued heavy losses from natural catastrophes took a toll on the results posted by insurers and reinsurers.
The resulting stronger demand among primary insurers for reinsurance protection, however, came up against a tighter overall supply. This gave rise to significant improvements in risk-adjusted prices and conditions for reinsurers.
Improving terms and conditions such as higher retentions by primary insurers or limitations of coverage are not fully reflected in risk-adjustments, thereby further improving the risk profile for reinsurers.
Bullish outlook for fac; property cat
In facultative reinsurance Hannover Re anticipates growth of more than 10% on an underwriting year basis. The market environment had already been attractive in recent years, and Hannover Re was able to secure further improvements in prices and conditions for 2023 coming off a correspondingly positive level.
These were particularly marked in business exposed to natural catastrophes. The main factor here was the shortage of capacity in traditional reinsurance. This should also open up growth opportunities in facultative reinsurance over the further course of the year.
In natural catastrophe business the premium volume booked by Hannover Re grew by around 30% in the 1 January renewals.
Further growth is expected in the renewals during the year. Prices and conditions improved sharply and in some instances to an extent not seen in decades, owing to the heavy loss experience of the previous year. Prices increased by an average of 30% on a risk-adjusted basis.
The premium volume booked by Hannover Re in the Americas region rose 6.7%. Further large parts of business in this region are not, however, renegotiated until the 1 June and 1 July renewals.
Impacted by devastating windstorm events such as Hurricane Ian and Hurricane Fiona, extreme cold snaps, storm fronts and tornados, North America was again the focus of losses from natural disasters in the past year.
Significant price increases were obtained in some cases, also extending beyond natural catastrophe covers. These went hand-in-hand with sometimes marked improvements in conditions and increases in the retentions carried by primary insurers.
Improvements in the property lines were much more pronounced than in the casualty lines of business.