The current market climate necessitates further price increases and improvements in the conditions of property and casualty (P&C) reinsurance for the 2022 renewals, according to Hannover Re.
The threefold combination of low interest rates, inflation expectations and large losses from natural catastrophes has caused more disciplined underwriting approaches among insurers and reinsurers, as well as a continued demand for high-quality reinsurance solutions.
Hannover Re expects a perpetuation of a positive pricing trend for treaty renewals in P&C reinsurance as at 1 January 2022.
In addition, the reinsurance firm predicts that conditions will show further improvement as a result of lingering uncertainties, such as future pandemics and cyber attacks.
It was highlighted that in Europe, the combination of progressive digitalisation, sustained growth and more widespread cyber attacks has caused “significant” rate increases in the cyber market.
Europe was also marked for the region’s natural catastrophe losses, which have “taken a considerable toll” on insurance business, particularly in Germany where the Bernd flooding is estimated to have caused insured market losses of more than €7.5 billion.
Elsewhere, Hannover Re identifies that the primary insurance market of North America continues to see rate increases across most lines, and emphasises a focus on the capital resources of reinsurers.
The fundamental challenges of primary insurers in Latin America are growing exposure to natural catastrophes and social unrest, which underline the need for robust, structured reinsurance solutions, according to Hannover Re.
In the most important regional update, the reinsurance company described Asia Pacific as “evolving into one of the largest global insurance markets”, in which reinsurers will benefit from medium- to long-term growth rates in both P&C reinsurance and the health and provision sector.
Looking at specialty lines, the insurance-linked securities market posted renewed growth and is expected to head towards a volume of €100 billion, while Hannover Re predicts that new issues of catastrophe bonds in the full year will exceed the previous high of approximately €12 billion.
Jean-Jacques Henchoz, CEO of Hannover Re, comments: “In P&C reinsurance, there is a need for further rate increases. Only in this way will reinsurers be able to provide reliable risk protection in an increasingly challenging environment.”
“While the pace of price increases has slowed somewhat of late in the renewals during the year, this was primarily the case in areas where substantial increases had already been recorded in prior years,” he adds.
Sven Althoff, member of Hannover Re’s executive board with responsibility for P&C reinsurance, continues: “In addition to our customer-centricity focused on long-term partnerships, we offer a broad range of products and tailored solutions that encourage our clients to grow with us worldwide and across multiple lines of business. In the current year and beyond, this will be reflected in further profitable growth in the gross premium booked in P&C reinsurance.”
