There is likely to be some incremental or additional demand for reinsurance capacity from European and German cedents at the key January 1st 2017 reinsurance renewal, according to global player Hannover Re.
Speaking at global reinsurance firm Hannover Re’s press briefing in Baden-Baden today, Michael Pickel, a member of the company’s Executive Board explained that discipline remains important in the challenging reinsurance market environment, but that some new demand for capacity is expected.
“In view of the ongoing low interest rate environment the insurance industry will continue to be put to the test, which is why technical pricing is equally important for insurers and reinsurers alike,” Pikel explained.
The reinsurance firm explained that under this type of pressure, in a softened reinsurance market, where discipline is vital to participants stability, there is “little room for concessions over insurance conditions.”
That suggests that Hannover Re feels that while low interest rates persist and the market remains challenging, it will be pushing for pricing stability at the January 2017 renewals.
The reinsurer explained that in natural catastrophe exposed lines of property business some regional European cedents in Germany suffered losses to portfolios due to heavy rainfall and storms.
“This will probably prompt some customers to adjust their reinsurance requirements, thereby further boosting demand for capacity,” Pickel explained.
Any sign of increased demand will be welcomed by reinsurance firms and ILS funds, all of which have capacity to deploy in January. Any growth in demand could help ILS funds to raise additional capacity, although it is expected that competition will be strong and that large, global reinsurance firms will wield their ability to discount for diversification once again, which is one reason rates are so soft on European windstorm risks.
Hannover Re also expects to see some premium growth in the German market at the January 1st 2017 reinsurance treaty renewals. The firm also suggested some price rises will be necessary in residential property lines, “on account of the unsatisfactory business development.”
Finally, Hannover Re also sees opportunity for its E+S Rück unit in cyber insurance coverage, where it says, “A sharp surge in interest is particularly likely in the commercial sector on account of recent developments.”
Related to that in the technology sphere, Hannover Re also sees an opportunity for its business to partner with Insurtech start-ups where it sees itself as “a partner of choice thanks to its good financial strength rating and consulting expertise.”
So overall a positive outlook from Hannover Re, with the reinsurance firm expecting some incremental demand, some increases in rates and continued discipline, which if the January renewals does pan out like that will be welcomed by the entire market.