DGAP-News: Hannover Rückversicherung AG / Key word(s): Miscellaneous
Reinsurance conference in Monte Carlo: Hannover Re expects further
price increases for treaty renewals on 1 January 2013
10.09.2012 / 09:00
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Reinsurance conference in Monte Carlo:
Hannover Re expects further price increases for treaty renewals on 1
January 2013
Monte Carlo, 10 September 2012: In advance of the industry gathering of
insurers and reinsurers in Monte Carlo the rating agency A.M. Best has
upgraded Hannover Re's rating from 'A' (Excellent) to 'A+' (Superior). A.M.
Best is thus recognising Hannover Re's excellent capitalisation, its
successful business model and its consistently good results in a
challenging environment.
Following on from pleasing treaty renewals in the first half of 2012
Hannover Re is looking ahead with confidence to the treaty renewals as at 1
January 2013.
The positive outcome of the treaty renewals in the current year was driven
by the heavy losses from natural disasters in 2011. These prompted
significant price increases, above all for loss-impacted programmes. The
adjustments made to natural catastrophe models also played a part in the
increases, albeit to a varying extent. The treaty renewals were once again
influenced by the low interest rate level and the associated difficulties
in generating sufficient investment income. As a result, the considerable
discipline exercised with respect to technical pricing was sustained.
'We were pleased with the outcome of our renewals in April and in
June/July. Along with the favourable development in global property
(catastrophe) lines, we are now seeing the first positive signs - including
in the United States - of an improved climate overall in the casualty
lines. We are confident that this trend will continue in the treaty
renewals as at 1 January 2013', Chief Executive Officer Ulrich Wallin
affirmed during a press conference in Monte Carlo.
For the coming renewal rounds it is Hannover Re's expectation that the risk
adequacy of rates will be sustained. All in all, further price increases
should be attainable. The company continues to see stable or rising demand
for reinsurance protection driven by a growing concentration of values in
urban conurbations as well as by the implementation of risk-based solvency
systems (for example Solvency II in Europe). The positive factors that have
already shaped previous treaty renewals, including the adjustments made to
natural catastrophe models and the low interest rate level, will again have
a favourable effect on treaty pricing as at 1 January 2013 and will prevent
market softening. Another crucial factor in the price trend will be the
question of whether 2012 still experiences any sizeable natural
catastrophes such as those seen in the previous year or whether the major
loss experience remains as moderate as it was in the first half-year.
For the three pillars of its non-life reinsurance - namely target markets,
specialty lines and global reinsurance - Hannover Re expects the treaty
renewals as at 1 January 2013 to bring the following developments:
I. Target markets:
- North America
Overall, an upturn can be observed on the North American market.
Despite the absence of major hurricanes, property business has experienced
sufficient losses from natural perils for rates in primary and reinsurance
business to remain on a high level. For the coming year further rate
increases should be possible, since the below-average profit expectations
with reduced returns on equity continue to be unsatisfactory. The positive
price trend is likely to be sustained, and should accelerate in the event
of a substantial catastrophe loss.
On the casualty side the anticipated trend reversal towards a hardening
market set in some quarters ago. The upswing varied widely in primary
insurance business; first evident in workers' compensation insurance, it
could be observed of late in almost all areas of professional indemnity and
casualty business as a whole. The rate increases are driven in particular
by lower investment income and negative run-off results for more recent
years.
- Germany
Industrial property and casualty business is experiencing protracted fierce
competition, even though the claims frequency - especially in fire
insurance - necessitates a trend reversal. Retail business is also coming
under increasing earnings pressure, since the large number of frost claims
at the turn of the year have left homeowners' insurance as a chronically
unprofitable line.
In motor business - both own damage and liability - a significant recovery
can be observed. Hannover Re therefore anticipates improved conditions and
rising premiums in original business, which should also be to the benefit
of reinsurers.
II. Specialty lines:
- Aviation
With capacities increasingly flowing into the market, the business climate
remains soft. Nevertheless, good opportunities are still anticipated for
2013; this is especially true of the BRIC countries and other emerging
markets. The rate level is stable overall. Given the moderate major loss
situation, a significant improvement in prices cannot be expected in the
next twelve months. Hannover Re ranks among the market leaders in aviation
reinsurance.
- Marine
On both the property and casualty side Hannover Re expects conditions to
continue improving in the offshore/energy line. The increases in premiums
and deductibles pushed through in recent renewals will be sustained owing
to the growth in values in original business. In the context of the 'Costa
Concordia' loss, the affected marine hull and liability reinsurance covers
will see increases - sometimes markedly so - in premiums and deductibles.
- Credit and surety
After exceptionally low claims activity over the past two to three years,
loss ratios in credit and surety insurance are showing moderate increases
owing to the muted economic growth around the world; overall, though, they
remain on a good level which is on a par with that seen before the
financial market crisis of 2008. The same is true of political risks
business. Primary and reinsurance prices are expected to remain largely
stable.
- Structured reinsurance
With an eye to preparations for the European Solvency II regulations,
demand for innovative and tailored reinsurance solutions is likely to
continue growing. This development includes aggregate excess of loss
covers, which protect a client's net retention against significant loss
scenarios with a low probability of occurrence. Outside the European Union,
too, Hannover Re expects this business to expand in view of the adoption of
risk-based models for calculating solvency requirements.
III. Global reinsurance:
Having suffered a heavy burden of major losses in 2011, it was possible to
obtain sometimes appreciable price increases in the current financial year
for the markets grouped together under the global reinsurance pillar. It is
Hannover Re's expectation that rates will continue to rise as at 1 January
2013 - at least for those regions that were impacted by losses.
- Global catastrophe business
In global catastrophe business the repercussions of the severe major losses
incurred in the previous year can still be felt. In the 1 January treaty
renewals as well as in subsequent renewal rounds in April and June/July,
reinsurers were able to push through further - in some cases sizeable -
price increases. Yet it is noticeable that the momentum of the rate
increases is slowly flagging, not least owing to a moderate major loss
burden in 2012. Nevertheless, it is to be expected that prices for natural
catastrophes will remain on a high level going forward.
North America: The renewals in June/July brought further modest rate
increases, although they were less marked than at the beginning of the
year. The price rises were driven not least by the previously mentioned
adjustments to natural catastrophe models. Steadily rising demand for
natural catastrophe covers is anticipated in 2013; even if the major losses
in the second half-year are low, further moderate price increases should be
possible.
Europe: The coming year is expected to bring growing demand. The key
drivers here are the more exacting equity requirements associated with
Solvency II and - in this market too - the adjustments made to natural
catastrophe models. Not least owing to the moderate major loss situation,
prices here are no longer commensurate with the risks. It will therefore be
necessary to push through selective price increases.
Japan: As expected, further significant price increases and improved
conditions were obtained here for earthquake and typhoon covers on the back
of the devastating earthquake in March 2011. The higher price level should
again be sustained in the coming year; certain programmes may see
additional rate increases.
Australia/New Zealand: In the renewals that took place within the year,
further vigorous rate increases were booked - especially for loss-impacted
programs. In 2013, too, the positive price trend should be sustained and
reinsurance prices can be expected to at least remain stable.
Non-Peak Areas: The severe floods in Thailand have prompted greater risk
awareness among reinsurers in smaller markets of certain Asian countries.
This is fostering a trend towards corresponding price increases.
- Global treaty business
Developments in global treaty business vary according to market and region.
Markets with particularly notable dynamics are described below:
Emerging Markets: Emerging markets offer considerable growth potential over
the long-term, even though economic growth has slowed somewhat as a
consequence of the global financial and economic crisis. Overall, 2013 is
expected to see a further rise in demand - increasingly for high-quality
reinsurance protection. Both in countries belonging to the CEE region and
in the markets of Asia and Latin America it should be possible to obtain
prices that are commensurate with the risks. In the latter case, there is a
concern that reinsurance business is increasingly being hampered by
national interests. All in all, a more competitive market environment is
anticipated for Latin America.
Agricultural risks: New business opportunities are arising out of the
further expansion of public-private partnerships, especially in emerging
markets with corresponding agricultural potential. Increasing food needs
are driving investments and stronger demand for agricultural covers at
insurers and reinsurers. The anticipated proliferation of extreme weather
events due to climate change is also causing farmers to increasingly take
out protection against possible crop failures. The insurance industry must
factor this development into the provision of viable insurance solutions if
it is to make the most of the new market opportunities. The price level for
agricultural covers is for the most part adequate despite considerable
competition.
Outlook
Hannover Re is going into the renewals as at 1 January 2013 in an
optimistic frame of mind. Based on its very good positioning in the markets
and its financial strength, Hannover Re is a reliable partner for its
clients. Thanks to its excellent ratings ('AA-' from Standard & Poor's and
'A+' from A.M. Best) it is able to participate disproportionately strongly
in the available favourable market opportunities. The company intends to
largely maintain its market shares or to expand them in markets that appear
attractive. Both for 2012 and beyond Hannover Re expects further growth.
One-third of non-life reinsurance premium alone derives from markets that
are posting double-digit percentage growth rates.
In light of the difficult capital market climate, considerable importance
attaches to preserving the value of assets under own management and
generating a stable return. For this reason, Hannover Re's investment
portfolio is guided by the principles of a well-balanced risk/return ratio
and broad diversification.
With a view to ensuring that risks to the reinsurance portfolio remain
calculable and exceptionally large losses cannot unduly impact the result,
the issue of risk management plays a central role in this regard too.
Diversification, for example with respect to reinsurance treaties, lines
and business segments, is a crucial factor.
In addition to using traditional reinsurance markets, Hannover Re also
continues to transfer insurance risks to the capital market in order to
protect against catastrophe risks. 'We are currently renewing our 'Eurus'
transaction with a volume of EUR 100 million', Mr. Wallin explained. 'Eurus
III provides coverage for severe windstorm events in various European
countries over the next four storm seasons.'
In view of the good business prospects overall in non-life and life/health
reinsurance as well as its strategic orientation, Hannover Re is looking
forward to a pleasing 2012 financial year. This is conditional upon the
burden of major losses not significantly exceeding the expected level of
EUR 560 million for the full year and assumes that there will be no drastic
downturns on capital markets.
For further information please contact:
Corporate Communications:
Karl Steinle (tel. +49 173 66 59 838,
e-mail: karl.steinle@hannover-re.com)
Media Relations:
Silvia Schaefermeier (tel. +49 511 5604-1560,
e-mail: silvia.schaefermeier@hannover-re.com)
Please visit: www.hannover-re.com
Hannover Re, with a gross premium of around EUR 12 billion, is the
third-largest reinsurer in the world. It transacts all lines of non-life
and life and health reinsurance and is present on all continents with
around 2,200 staff. The rating agencies most relevant to the insurance
industry have awarded Hannover Re very strong insurer financial strength
ratings (Standard & Poor's AA- 'Very Strong' and A.M. Best A+ 'Superior').
Please note the disclaimer:
www.hannover-re.com/misc/disclaimer-pr-050811
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Language: English
Company: Hannover Rückversicherung AG
Karl-Wiechert-Allee 50
30625 Hannover
Germany
Phone: +49-(0)511-5604-1500
Fax: +49-(0)511-5604-1648
E-mail: info@hannover-re.com
Internet: www.hannover-re.com
ISIN: DE0008402215
WKN: 840 221
Indices: MDAX
Listed: Regulierter Markt in Frankfurt (Prime Standard), Hannover;
Freiverkehr in Berlin, Düsseldorf, Hamburg, München,
Stuttgart; Terminbörse EUREX
End of News DGAP News-Service
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184618 10.09.2012
DGAP-News: Reinsurance conference in Monte Carlo: Hannover Re expects further price increases for treaty renewals on 1 January 2013
| Source: EQS Group AG