Demand for reinsurance coverage in Germany is expected to increase overall at the key January 1st 2016 treaty renewal season, with increased frequency of catastrophe events a key driver, according to leading reinsurer Hannover Re.
In recent years Germany has been hit by a number of perhaps unexpectedly large weather catastrophes, including hail, rainfall, flooding and both summer and winter storms.
“Most significantly, the recently observed elevated frequency of natural perils events is prompting primary insurers to review their protection in the treaty renewals and extend it accordingly,” commented Michael Pickel, a member of Hannover Re’s Executive Board at a press conference held during the Baden-Baden reinsurance symposium.
Hannover Re highlights an increased appetite for European windstorm reinsurance protection from clients, as well as ceding companies increasing their focus on extreme rainfall and flooding risks.
On top of the weather and catastrophe reinsurance focus, Hannover Re is also expecting the impending start of the Solvency II regulatory regime to result in some increased appetite for reinsurance protection at the 1/1 renewals.
E+S Rück, the unit responsible for German business within the Hannover Re Group, expects to see stronger demand for reinsurance protection as a result of regulatory developments as well.
E+S Rück also foresees improving conditions in industrial facilities cover, due to industrial fire insurance remaining under strain due to increasing numbers of mid-sized loss events. The reinsurer notes that this could lead to improved conditions. Similarly, motor insurance loss experience should ensure some brighter spots in motor reinsurance business for the firm.
Currently the cost of reinsurance capacity for European windstorm and other natural peril or weather risks is very low, a factor of high-levels of competition, low European windstorm losses and excess capital, making it a difficult area for catastrophe bond issuance in recent years.
However the insurance-linked securities (ILS) market takes a reasonable share of many European catastrophe reinsurance programs, on a collateralized basis, so any increase in demand in Germany should trickle through to provide more opportunity for the ILS space.