The CEO of German reinsurer Hannover Re, the third largest reinsurance firm in the world, said in an interview with newspaper Die Welt that he expects reinsurance premiums to fall in 2014.
In the interview (available in German on the Die Welt website here) Ulrich Wallin said that demand for reinsurance coverage from primary insurers is not sufficient to meet reinsurers needs to deploy capacity. This, on top of an abundantly capitalised reinsurance market, the influx of capital from third-party sources such as pension funds and capital markets investors as well as low natural catastrophe losses in 2013 is pressuring pricing. Wallin expects this pressure will persist into 2014.
Wallin said that Hannover Re would not be drawn into a price war, adding that he would rather decline to underwrite business than see pricing drop to below the level Hannover Re feels is commensurate with the risks.
For a large reinsurer like Hannover Re the ability to decline business, or move capital into other lines such as life and health, means that it can continue to wait out better pricing on some property catastrophe reinsurance lines of business. For smaller, more property catastrophe focused reinsurers this luxury may not be available and further declines in pricing will be particularly unwelcome.