Hannover Re grew 14% at renewals, but says catastrophe rates still too low

Hannover Re, the German headquartered global reinsurance company, grew its premiums by 14% at the key January renewals, adding a significant 20% to its North American book, but still feels catastrophe reinsurance rates have further to move.

Overall Hannover Re reported a 2.3% rate increase across its renewal book and while the actual figures were much higher in some areas of its renewal premiums, the reinsurance giant hopes for more rate firming at the renewals through 2020.

Particularly significant growth was experienced, in terms of premiums, in North America, the United Kingdom and agricultural products, the reinsurer said, helping it to grow its traditional property and casualty reinsurance book by an impressive 14%.

“We can look back on a solid main renewal season that largely lived up to our expectations,” explained Jean-Jacques Henchoz, Chief Executive Officer of Hannover Re.

“Thanks to our very good position as one of the world’s leading reinsurers, we generated pleasing growth in our renewed portfolio at generally slightly improved prices and conditions.”

Pproportional reinsurance saw the strongest growth, at a 15.5% increase in premiums, while pricing increased 2.1% in this segment of Hannover Re’s renewal book.

Non-proportional reinsurance business grew by 9.7%, but here price increases were more significant at 2.9%.

Premium growth was particularly strong in some regions for Hannover Re, with its North American business premiums growing almost 20% at the renewals, while Latin America, the Iberian Peninsula and agricultural risks grew a huge 35.1%, the UK, Ireland and the London Market grew by 22.1%, Germany, Switzerland, Austria and Italy by 5.9%, Continental Europe by 10.6%, Asia, Australia and the Middle East by 8.6%, credit, surety and political risks by 8.6% and aviation and marine reinsurance grew by 13.7%.

The natural catastrophe reinsurance business also grew, with Hannover Re adding an additional 7.8% of premiums at the January 2020 renewals, as it took advantage of rate rises around the globe.

But, for the most part, Hannover Re bemoans the fact that price increases came in lower than expected.

“Competition remained fierce even though the available capacities from the ILS market contracted slightly. Despite higher additional reserves set aside for prior-year losses such as hurricane Irma in 2017 and typhoon Jebi in 2018 and further heavy loss expenditure incurred in the 2019 financial year from typhoons Hagibis and Faxai as well as hurricane Dorian, it was only possible to obtain stable prices and conditions overall as at 1 January,” the reinsurer explained.

The U.S. catastrophe reinsurance renewals did see slightly better increases, with “stable or modestly improved prices” seen by Hannover Re.

CEO Henchoz explained, “It remains the case that the rate level for natural catastrophe covers in particular, and here above all in Japan, Latin America and the Caribbean, is too low and there is a need for further improvement.”

Further improvement is hoped for and expected by Hannover Re, as the company expects to see “more appreciable impetus on the pricing side” at the renewals later in 2020, given their focus on loss affected regions.

Despite all this growth and higher pricing across its renewal book, Hannover Re remains focused on its targets.

“The positive trend that emerged from the 1 January renewals should become more pronounced in the subsequent rounds of renewals during the year, not least because these also concentrate more on the loss-affected programmes,” CEO Henchoz said.

“With this in mind, we are confident of achieving all the goals that we have set ourselves for the 2020 financial year.”

That includes a Group net income target of around EUR 1.2 billion for the 2020 financial year, while Hannover Re expects gross premium growth of around 5%.