Hannover Re expects rising P&C reinsurance rates in Germany

Reinsurance giant Hannover Re’s German subsidiary E+S Rückversicherung AG is expecting rising prices and improving terms at the renewals of German reinsurance business, including in natural catastrophe risks.

The company says that a global contraction in reinsurance capacity is making itself felt in Germany as well, so Hannover Re believes similar market forces will be at play, including the push for firmer prices.

The combined threats of COVID-19 and the low interest rate environment are supporting a reversal of trends in insurance and reinsurance, driving higher pricing the reinsurer said.

“Along with the direct impacts of the pandemic, the renewed decline in interest rates is taking a toll on insurance industry profits. Price increases at primary insurers are therefore absolutely essential and adjustments are also needed on the reinsurance side,” explained Dr. Michael Pickel, Chief Executive Officer of E+S Rück.

“During the Covid-19 pandemic, as always, we are a reliable partner at our customers’ side and we help them to shoulder the associated challenges. This includes not only providing traditional reinsurance but also assisting with claims management, offering tailored solutions for solvency relief and jointly developing new coverage concepts.”

At the same time, demand for reinsurance is expected to continue growing.

Hannover Re specifically cites natural catastrophe reinsurance in Germany as an area likely to see rising prices at the important January 2021 renewals.

“It is to be anticipated that reinsurance prices will improve overall on account of catastrophe losses around the world and reduced reinsurance capacity against the backdrop of what has so far tended to be an average regional loss burden,” the company explained.

Adding that loss-affected catastrophe reinsurance programs are especially likely to see price increases.

The German property catastrophe reinsurance market has remained softened by the appetite of its own reinsurers in recent years.

Any firming of prices here would be welcomed by the insurance-linked securities (ILS) market, as German reinsurance pricing has been depressed in recent years.

Whether German reinsurance rates really firm up to any significant degree will depend on the appetite of the major reinsurers based there, including Hannover Re.

It is the appetite of local reinsurers that has kept reinsurance pricing so subdued there in recent years and it is only through a change in that appetite that gains may be seen going forwards.

Has COVID-19 provided enough of a scare to refocus the German reinsurance market on its ability to make sustainable profits from its underwriting in isolation?