Recent flooding in Europe and the fact Germany has suffered its most significant natural catastrophe insured losses in over two decades, suggest that demand for natural catastrophe reinsurance and its pricing will both move higher, while other major nat cat zones should also firm more in 2022, according to executives at Hannover Re.
Speaking this morning at a media briefing, the Hannover Re senior executive team explained that flooding in Europe and Germany is one factor causing them to continue forecasting rate hardening across the reinsurance market at the January 2022 renewals.
Across reinsurance, Hannover Re believes that market conditions and losses necessitate further price increases and improvements in conditions for the 2022 renewals.
This is Hannover Re’s view for January, April and mid-year renewals for 2022, with the reinsurer hoping that rate hardening will be seen broadly across the market next year.
“Hannover Re anticipates a continuing trend towards higher prices and improved conditions in property and casualty reinsurance for the various rounds of renewals in 2022,” the company summed up in a release this morning.
“In property and casualty reinsurance there is a need for further rate increases. Only in this way will reinsurers be able to provide reliable risk protection in an increasingly challenging environment,” Jean-Jacques Henchoz, Chief Executive Officer of Hannover Re said. “Particularly where natural catastrophe risks are concerned, adjustments are unavoidable. While the pace of price increases has slowed somewhat of late in the renewals during the year, this was primarily the case in areas where substantial increases had already been recorded in prior years.”
At January 1st 2022 renewals, Hannover Re expects, “The positive pricing trend to continue, especially in loss-affected lines and regions. At the same time, conditions are also likely to show further improvement on account of the considerable uncertainties, most notably in relation to future pandemics and cyber attacks.”
Hannover Re is expecting conditions to improve considerably in Germany, given the natural catastrophe experience in the country this year.
Michael Pickel, Member of the Executive Board – Property & Casualty, explained during this morning’s briefing that, “The European floods, will drive a need for more catastrophe reinsurance capacity and also shows the need for higher rates.”
He went on to explain that the increasing severity seen in property business also means that increases in rates for both proportional and non-proportional reinsurance are expected to be seen.
In the United States, Hannover Re said that, “Further rate increases and clarifications in the scope of coverage are essential,” as it believes firming needs to continue here as well.
The reinsurer also feels that nat cat reinsurance rates need to increase in the US, as, “The extreme weather anomalies triggered by climate change are leading to a permanent increase in claims frequencies and loss amounts.”
In Europe, on catastrophe reinsurance specifically, Hannover Re said, “Further commensurate adjustments to the reinsurance treaties are expected for the 2022 renewals.”
For Japan catastrophe business, Hannover Re said it expects, “Further moderate hardening for Japanese catastrophe business in 2022.”
While, finally, in Australia, the company said, “The significant and frequent large losses of recent years will keep up the pressure on the rate level until 2022.”
During this morning’s briefing, CEO Jean-Jacques Henchoz also said that, “We see a continuing trend towards higher pricing and improved conditions in P&C reinsurance.”
As a result, the reinsurer continues to believe that a flight to quality will be seen in global reinsurance markets, especially in the US where cedants look for reinsurers with strong capital levels.
Summing up he said, “The outlook remains positive in spite of the challenges and loss activity. We also confirm 2021 targets can be met, subject to large losses remaining within budget for the year and no major distortions in the capital markets.
“With our strong balance-sheet we’re ready to deploy capital in 2022.”