Hannover Re sees nat cat as “technically risk-adequate”, could deploy more capacity

Global reinsurance firm Hannover Re said that natural catastrophe risk pricing remains “technically risk adequate” but notes an expectation that pricing will likely continue to soften at renewals in 2027. However, attractive opportunities continue to be seen and the company said it “is prepared to make additional capacity available.”

This morning, at the Monte Carlo Rendez-vous, Hannover Re released its thoughts on reinsurance market conditions and prospects, saying it sees an “increasingly challenging market environment in property and casualty reinsurance.”

The reinsurers sees “slightly lower prices while quality of the business remains good,” and noted that “terms and conditions and retentions still on a good level.”

As a result, Hannover Re explained its outlook saying that, “selective growth at risk-adequate prices remains achievable.”

“Growing uncertainties combined with intensifying competition are causing increasing headwinds for the reinsurance industry. Geopolitical tensions, inflation, digital threats and climate-related risks make it more difficult to evaluate long-term claim costs and hence risk-appropriate pricing,” explained Clemens Jungsthöfel, Chief Executive Officer of Hannover Re today.

“Drawing on our thorough risk assessment, capital strength, lean operating model and consistent underwriting discipline, we create the basis for profitable growth across market cycles – both for our clients and for Hannover Re.”

Hannover Re said that high-quality reinsurance capacity remains in-demand, but that supply of capital keeps increasing in the sector.

The reinsurer noted higher competition and price pressure in property catastrophe reinsurance, but with terms and conditions in the main largely stable.

For the January 2027 renewals, Hannover Re anticipates largely risk-adequate pricing across P&C reinsurance.

The company said, “Along with slightly lower prices, terms and conditions will likely remain broadly unchanged. Hannover Re plans to make at least stable reinsurance capacities available for the renewals, provided risk-adequate prices can be obtained.”

Sven Althoff, Executive Board member for Hannover Re’s property and casualty reinsurance went into more detail, saying, ““We grow where prices are commensurate with the risks and relinquish business that does not meet our profitability requirements. Growth opportunities are expected in regions with increasing insurance penetration and economic growth as well as in markets where we expand our shares selectively.

“Thanks to our low expense ratio, pure-play focus on reinsurance and long-standing customer relationships, we are able to benefit from these profitable growth opportunities while at the same time securing our profitability on a lasting basis.”

Demand for reinsurance remains solid in natural catastrophe risks and is expected to continue growing, the reinsurer said, and pricing is still technically risk-adequate.

Commenting on the main global nat cat markets worldwide, Hannover Re said, “Prices in North America have softened in recent renewals, but they are still risk-adequate from a technical standpoint. Further market developments will be crucially shaped by claims activity, especially involving weather-related natural perils such as severe storms, tornados, hail and heavy rain events. Following significant adjustments that took effect on 1 January, Hannover Re expects the price trend in Europe to normalise and stabilise in the absence of any sizeable loss events. As far as retentions and scope of coverage are concerned, terms and conditions will likely remain broadly unchanged. Losses in the Asia-Pacific region remained below the long-term expectation overall, leading to more marked price reductions – especially in Japan, Australia and New Zealand. In view of the price corrections that have already taken place, Hannover Re now sees a need for stabilisation of the pricing level.”

At the 2027 reinsurance renewals, Hannover Re expects “moderate price movements that will depend primarily on the claims experience and regional market circumstances.”

But the company highlighted that, “Risk-adequate prices as well as terms and conditions remain key given the considerable volatility of natural catastrophe business.”

Adding that it still has the appetite to grow if the market price levels remain acceptable, “Hannover Re sees attractive opportunities in this landscape and is prepared to make additional capacity available.”