Additional “significant” increases in prices for catastrophe reinsurance are to be expected at the renewals in 2023, according to Hannover Re’s German subsidiary E+S Rückversicherung AG.
For another year running, Hannover Re’s German subsidiary has said that catastrophe reinsurance rates much rise at the January renewal season, as losses from natural disasters in Germany and Europe remain elevated.
Natural catastrophe losses are taking a substantial toll on the insurance industry in 2022, E+S Rück explained, with its parent company saying, “The Hannover Re subsidiary responsible for the Group’s German business, expects significant improvements in risk-adjusted prices and conditions in property and casualty reinsurance on the back of continued heavy claims expenditure and soaring inflation.”
“Both insurers and reinsurers alike find themselves facing a sharp rise in inflation, which together with sustained high expenditures for major claims is adversely impacting the profitability of the entire industry,” Dr. Michael Pickel, Chief Executive Officer of E+S Rück commented.
“While the images of last year’s devastating flooding still remain very much in all our minds, the winter storms, droughts and wildfires experienced this year show that Europe is seeing an increased prevalence of natural disasters.
“All this makes further price rises in both original and reinsurance business indispensable.”
In Germany, natural catastrophe losses once again exceeded the multi-year average through the first-half of 2022, while in other parts of Europe significant loss events such as the severe storms and hail events in France have also elevated claims.
As a result, “E+S Rück anticipates significant adjustments to prices and conditions in the property line – extending beyond pure catastrophe covers,” the reinsurer said.
Hannover Re has been calling for reinsurance rate increases at the January renewals for some years now, with catastrophe risks seen as an area that rates have been underpriced in Germany and other parts of Europe.
Alongside rising nat cat losses and high claims from events this year such as winter storms “Ylenia”, “Zeynep” and “Antonia”, Hannover Re also sees issues related to inflation in Europe.
“High inflation rates are further adding to claims costs, while increased demand for natural perils covers in the aftermath of the previous year’s severe flooding has led to higher exposures on the primary insurance side,” the reinsurer explained.
Adding that, “At the same time, capacities in the reinsurance market have contracted overall.
“On the whole, prices for catastrophe covers should therefore rise significantly.”
“While further adjustments to pricing and conditions are unavoidable both in original business and on the reinsurance side, at E+S Rück we remain committed to partnership-based negotiations with all market players and to long-term customer relationships,” Pickel said. “We can only meet the current and future challenges together. I am optimistic that we will be able to do this in the upcoming renewals.”