Global reinsurance firm Hannover Re has reported strong growth and price increases at the key January 2022 renewal season, with particularly strong expansion of its portfolio of natural catastrophe risks, leading the reinsurer to also increase its major loss budget for 2022.
Overall, Hannover Re reported 8.3% premium growth and an average inflation and risk-adjusted price increase of 4.1% from the renewal season.
The strongest price increases were seen in Europe, which had been far more loss affected in 2021 than recent years, in catastrophe exposures and also in cyber risks, the company explained.
On top of higher levels of natural catastrophe claims in 2021, the other factors driving renewal rates were low interest rates and sharply higher inflation, the reinsurance firm said this morning.
“We can look back on a satisfactory round of treaty renewals with additional rate increases for the fifth year in a row, while further enhancing the quality of our business through active cycle management and improvements in conditions,” explained Jean-Jacques Henchoz, Chief Executive Officer of Hannover Re.
“In many areas the positive pricing momentum has been sustained,” he continued, of which is said “This is essential, also bearing in mind the continued low interest rates and substantial large loss expenditures.
“As a further factor, risk-adjusted price increases were clearly impacted by higher inflation rates.”
Natural catastrophe business was a key area of growth for Hannover Re at this renewals, as the reinsurance firm took advantage of rates being at their highest levels in some years.
Rate improvements and growth were secured across almost all regions of natural catastrophe exposure at the renewals, while demand for nat cat reinsurance was seen as high to rising everywhere as well.
Overall, natural catastrophe reinsurance rates increased on average by 6.6%, Hannover Re said, while conditions were seen to improve as well.
In the United States and Europe, rates for natural catastrophe business increased by double-digits at the renewals, especially for loss impacted programs.
Hannover Re grew its natural catastrophe reinsurance premium volumes by around 25% at the January 1 renewals, which is a significant increase.
Partly down to this strong growth in writing catastrophe risks, Hannover Re has in response raised its loss budget for 2022.
The reinsurer expects more catastrophe risks will be retained, which is unsurprising in such a strongly priced renewal market, while its enlarged nat cat book also raises its loss expectation from catastrophes.
As a result, Hannover Re has increased its net major-loss budget for 2022 to EUR 1.4 billion from EUR 1.3 billion.
That figure compares to a major loss budget of EUR 1.1 billion in 2021, reflecting strong growth, but also perhaps a realisation that it had been set low previously.
The reinsurer confirmed its guidance for 2022, with a target of Group net income of EUR 1.4 billion to EUR 1.5 billion for the 2022 financial year.
For full-year 2021, Hannover Re is anticipating net income will reach EUR 1.23 billion (up on the prior years EUR 883 million) based on preliminary key figures, which is towards the top of its EUR 1.15 billion to EUR 1.25 billion guidance.
The reinsurer grew its gross premiums by 12.8% in 2021, a figure that could be matched in 2022, it seems.
“Very high catastrophe losses and rising inflation came on top of the continuing pandemic last year. Despite this, we generated a respectable year-end result of EUR 1.23 billion that was in the upper range of our expectations,” Henchoz stated. “This underscores our resilience and performance capability and it gives me confidence that we will achieve the goals we have set ourselves for the 2022 financial year.”
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