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Hannover Re cites ~10% price rises for US cat reinsurance renewals


Hannover Re gave its report on the January 2021 reinsurance renewals today, citing around 10% price improvement across U.S. natural catastrophe reinsurance business, while across its book renewed business was subject to price increases of 5.5% and premium volumes rose by 8.5%.

hannover-re-logoHannover Re’s CEO Jean-Jacques Henchoz reports a “thoroughly satisfactory round of treaty renewals” at January 2021.

“The pricing momentum of the past year held up in the 1 January renewals. The sustained trend reversal in prices continues,” Henchoz explained.

Adding that, “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.”

Henchoz also said during a media call that, in terms of renewals, “In some places we’ve seen the second or even third year of increased premium quality.”

But he added that, “We’re not in a disrupted market, therefore I would call the January renewals 2021 orderly.”

Also acknowledging that price increases were good, but not “more moderate than some had anticipated.”

Hannover Re has again been expansive at the renewals, deploying more capital to build on a book that has been growing, particularly in the United States, in recent years.

The company secured premium growth across its traditional property and casualty reinsurance book of 8.5% in the treaty renewals, with price increases of 5.5% achieved across the renewed business.

The reinsurer cites “another substantial burden of large and frequency losses in various regions,” as well as COVID-19 pandemic uncertainty and lower interest rates as the main drivers of the reinsurance market firming.

In particular, Hannover Re cites North American, UK and specialty reinsurance renewals as having seen particular gains in pricing, while the company also explained that quota share and proportional business is expected to be a key driver of rate for reinsurers, as primary pricing flows through.

We previously explained that the major reinsurers quota share activity could drive just as much improvement as excess of loss rate firming through the year ahead.

For North America Hannover Re said that, “Rate increases in primary insurance across virtually all lines as well as improved reinsurance conditions will have positive implications for profitability in the 2021 calendar year.”

The reinsurer also said that it, “anticipates additional business opportunities for the remaining upcoming renewals during the year because primary insurers are increasingly looking for high-quality reinsurance capacity.”

Reinsurance conditions also showed “further hardening” in Latin America, with Brazil and Chile particularly notable and Hannover Re expects this will be sustained through 2021.

Hannover Re booked an impressive 15.3% of premium growth in North and Latin America, 4.1% premium growth in Asia Pacific and 10.6% premium growth in Europe, the Middle East and Africa.

Across natural catastrophe reinsurance renewals, the reinsurer cited “modestly improved prices and conditions” as obtained.

With rate increases up as much as 10% in the United States, especially to loss affected programs, which bodes well for the future U.S. renewals at the mid-year.

European property catastrophe reinsurance renewals only really saw susbtantial price increases where losses had impacted towers, the reinsurer explained, while pricing for programmes that were loss-free “held stable or nudged slightly higher.”

Importantly though, Hannover Re noted that “the rate level here was also better in comparison with the previous year’s renewals.”

The UK and Ireland was another region where Hannover Re cites improved nat cat pricing, with “markedly better prices and conditions” obtained.

The reinsurer reports 2.5% to 5.5% price improvements across cat programmes in Europe and the rest of the world.

Hannover Re also said that, at the January renewals, it introduced exclusions for pandemic and cyber related risks into contracts, in particular with a focus on property related business interruption.

Also improving the conditions of its renewed reinsurance portfolio, Hannover Re said that its customers were carrying higher retentions, improving the quality of its book.

Looking ahead, CEO Henchoz said, “The positive trend coming out of the 1 January renewals should be sustained in the subsequent rounds of renewals.

“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.”

Hannover Re also gave preliminary guidance on its full-year 2020 results, in which it revealed an underwriting loss for the year as its combined ratio deteriorated to 101.6%, well below the 97% target.

However, given the pandemic impacts of over $1 billion, plus the elevated frequency of catastrophe losses, this is not surprising.

“Our extremely robust result in the 2020 pandemic year shows that we can deal well with such extreme situations thanks to our diversified business model, our risk management and our capital strength,” Henchoz explained. “We are well placed to achieve our targets for the 2021 financial year.”

For the 2021 financial year, Hannover Re targets Group net income of EUR 1.15 billion to EUR 1.25 billion.

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