Treaty renewals look positive: Hannover Re

Hannover Re booked premium growth in traditional property and casualty reinsurance of 8.5 percent adjusted for exchange rate effects in the treaty renewals as at 1 January 2021. A price increase of 5.5 percent was achieved for the renewed business. Along with another substantial burden of large and frequency losses in various regions, this price trend was driven chiefly by lower interest rates and uncertainties surrounding the further course of the Covid-19 pandemic.

“All in all, we can look back on a thoroughly satisfactory round of treaty renewals. The pricing momentum of the past year held up in the 1 January renewals. The sustained trend reversal in prices continues,” said Jean-Jacques Henchoz, chief executive officer of Hannover Re. “We secured further improvements in prices and conditions to a varying extent across all lines and regions. Particularly in times of crisis, robustly capitalised reinsurers such as ourselves are highly sought-after.”

Of the total premium volume booked in the previous year on an underwriting-year basis in traditional property and casualty reinsurance amounting to EUR11,531 million, treaties with a volume of altogether EUR7,753 million – or 67 percent of the business – were up for renewal as at 1 January 2021. Of this, a premium volume of EUR7,018 million was renewed, while treaties worth EUR735 million were either cancelled or renewed in modified form. Including increases of EUR1,396 million from new treaties and from changes in prices and treaty shares, the total renewed premium volume came in at EUR8,414 million.

Proportional reinsurance posted growth of 8.3 percent in the renewals, generating a renewed premium volume of EUR6,329 million. Prices here were up by 4.4 percent. The renewed premium volume in non-proportional reinsurance grew by 9.3 percent to EUR ,085 million. The price increase amounted to 8.8 percent.

The market environment in aviation reinsurance continued to improve for reinsurers, in part due to the more unfavourable development of a large loss, a statement said. This encouraging trajectory limited the negative impact on premium volume associated with reduced activities – sometimes markedly so – in the aviation sector owing to Covid-19. Supported by a clearly hardening primary insurance climate, the market for marine reinsurance echoed this trend. Despite sustained intense competition and existing capacities, improvements in the pricing and risk structure were achieved in both the marine and offshore energy segments.

Modestly improved prices and conditions were obtained in natural catastrophe business. In US natural catastrophe business price increases of around 10 percent were possible, especially under loss-affected programmes. In Europe substantial price increases were for the most part only achievable under programmes that had suffered losses.

“The positive trend coming out of the 1 January renewals should be sustained in the subsequent rounds of renewals,” Henchoz said. “The significant price increases that we are seeing in many lines on the primary insurance side will also gradually support rates in reinsurance business. We benefit from this directly through proportional covers.”