Hannover Re’s E+S Rück sees more intense catastrophe risk competition, ILS options for clients

Hannover Re’s property and casualty reinsurance subsidiary in Germany anticipates continued strong reinsurance demand at the next rounds of renewals, but notes that rising capacity levels are driving more competition on pricing and terms, while also highlighting insurance-linked securities (ILS) as a complementary offering for clients.

With the Baden-Baden reinsurance meetings underway in the country, Hannover Re’s German subsidiary has given its outlook for the regional marketplace, explaining that risks are rising despite moderate catastrophe loss costs of late.

Competition is intensifying in many parts of the reinsurance market in the region, as traditional players have growing capital bases.

But overall, the company believes demand for high-quality reinsurance protection will remain strong in Germany, with a stable environment overall but characterised by an increasing level of competition to deploy capacity.

Thorsten Steinmann, Chief Executive Officer of E+S Rück and the member of Hannover Re’s Executive Board responsible for property and casualty reinsurance in Continental Europe, Latin America and North Africa commented, “The moderate catastrophe losses of the past few years should not obscure what remains a demanding and highly uncertain risk landscape. Natural perils, inflation, cyber risks and geopolitical instabilities are adding to the potential for losses and confronting insurers and reinsurers alike with increasingly complex challenges.

“At the same time, many primary insurers have significantly strengthened their earnings and capital position. This builds stability and establishes a good foundation for the upcoming renewals. With certain segments becoming increasingly competitive, we continue to view a disciplined underwriting policy as well as risk-adequate prices and conditions as essential for ensuring the long-term availability and viability of reinsurance protection.”

Inflation and costs continue to rise in P&C reinsurance and in clients natural catastrophe reinsurance programmes E+S Rück still sees many of them “adequately priced to reflect the risks.”

But rising capacity, thanks to higher capital bases of traditional companies, is “leading to more intense competition and adding to the pressure on prices and conditions.”

Recent catastrophe losses from hail events in Switzerland, southern Germany, northern Italy and the neighbouring Alpine regions demonstrate that the underlying risks remain high, the Hannover Re subsidiary said.

“In the upcoming renewals, therefore, the individual claims experience, the quality of the programmes as well as risk-appropriate prices and conditions will continue to be decisive factors for E+S Rück,” the company explained this morning.

Catastrophe bonds and insurance-linked securities (ILS) offer alternative and increasingly important capacity solutions.

E+S Rück explained, “Alternative risk transfer solutions continue to gain in importance. Insurance-linked securities (ILS) complement traditional reinsurance by providing additional capital market capacity.

“In cooperation with Hannover Re, E+S Rück offers its clients access to ILS solutions.”