The market has moved little after years of rate decreases between 2013 and 2017

The market needs something “dramatic to see a significant hardening”, according to Hannover Re chief executive Ulrich Wallin.

Wallin said after the years of rate decreases between 2013 and 2017 and the market had not budged much.

“There is still a very competitive price level compared to the previous years of the cycle,” he said.

Although he expected a “relatively stable renewal” there were some concerns, especially around the run off from the 2017 catastrophe losses.

Hannover Re also noted that some reinsurers’ results in 2017 had deteriorated sharply.

In 2018, some had been hit by follow-up losses from natural disasters.

“The further development of the loss amounts from last year’s hurricanes as well as the minimal large losses incurred in the current year to date will be crucial in determining prices in property and casualty reinsurance,” Wallin said.

“The lower the strains from catastrophe losses turn out to be this year, the more difficult it will be to push through requisite additional price increases in the coming year. Nevertheless, we are seeing strong demand and hence rather favourable opportunities for growth in certain segments.”

Aviation concerns

In the London market, Hannover Re’s speciality lines worldwide board member Sven Althoff, said aviation major risk was a major concern.

“Unfortunately, aviation pricing is at a very low and in our opinion unsustainable level,” he said.

“The market needs to turn but unfortunately, in insurance and reinsurance, we have seen over capacity.”

He was more upbeat about the rating outlook on marine, meanwhile shrinking capacity was helping rate on property.

“We have seen very pronounced changes on property classes.

“We have seen the capacity shrinking in the London market which leads to good levels of rate increases in insurance and reinsurance and we expect that trend to continue into next year.”

Ogden caution

UK motor is a part of the book where Hannover Re remains cautious.

The UK has experienced a turbulent period on motor rates, with a hefty spike in prices and then a settling down in rates.

This is due to government announcing changes last year in the discount rate, the Ogden rating tables, to more favourably benefit the claimants of serious injury receiving payment from insurers.

The government then announced a review following complaints that the change was too onerous on hard-pressed UK motor insurers.

Overall, Hannover Re is not seeing the right kind of prices increases coming through.

“Overall, we were disappointed with the motor excess of loss side. Our expectation was for rate increases were higher than what was achieved,” Althoff said.

“Overall the exposure has been slightly reduced because that we felt that despite the increases, that we are not a technically adequate level following the changes of the Ogden rate increases.”

Hannover Re eyes €1bn profit

On strategy and financial performance, Hannover Re is targeting 2018 net income of more than €1bn, dependant on loss expenditure staying below €825m.

Hannover Re will focus on traditional reinsurance, supplemented by individual coverage concepts such as product-oriented cooperation arrangements with primary insurance customers.

Opportunities include digitalisation and demand for coverage of related cyber risks – not just from large corporations but now also from small-l and medium-sized enterprises – which is on the rise.

Asian growth markets, notably China and India, were listed as areas for potential growth, according to Wallin.

Overall, Wallin stressed the market was soft so it was critical to remain disciplined on the business they write.

“The positive future prospects for the global reinsurance market are the cornerstone of our success over the medium and long term. With this in mind, we are concentrating quite deliberately on the products and services typically associated with a reinsurer “Wallin said.

“We have no doubt that this is the right course to pursue when it comes to generating sustainable value for our clients, our shareholders and our employees.”