Asia-Pacific key to Hannover Re’s growth objectives

Asia-Pacific remains a very important part of Hannover Re’s growth plans, as the reinsurer looks to build on the strong growth in the region it posted in 2020—but in a sustainable way, says Michael Pickel, member of the executive board, property/casualty, Hannover Re.

“The region is a very important part of our growth plans—one of our strategic initiatives is to grow the Asian portfolio in line with the cycle,” he said. “There is no doubt that it is a growing region but we will not seek growth for growth’s sake there. We always seek a more selective approach; we want to be the best in class.”

As a region, Asia-Pacific has been growing faster than Hannover Re’s core markets in Europe and the Americas. In 2020, Hannover Re wrote a total of around €5.5 billion ($6.2 billion) in gross premiums in the Asia-Pacific region. Its property & casualty reinsurance premium in 2020 increased by 25.7 percent and in life & health reinsurance by 14.8 percent compared to 2019.

The reinsurer has not indicated what sort of growth it is expecting in 2021, but it has said it is seeking an additional €140 million EBIT (earnings before interest and tax) by 2023, an ambition it has said it is on track to hit.

He said that, within the large Asia-Pacific region, Australia remains a key market for it, where rates are also hardening after claims activity. Japan presents opportunities in catastrophe business as the market is adjusting after typhoon losses.

Hannover Re’s offices in Kuala Lumpur, Malaysia, and Shanghai, China, also present growth opportunities, notably through new products and initiatives it has launched that span cyber, parametric products and even pet insurance.

“We were pleased to have recruited some fantastic people into our offices in the region, notably China, even through the COVID-19 pandemic,” Pickel said. “That shows that our brand is highly regarded and recognised and we achieve that even while grappling with the pandemic.”

Ideas on the table

Pickel describes the Asia-Pacific region as very traditional in its approach to reinsurance. Generally, he said, most markets in the region, excluding Australia and Japan, have not experienced the same level of hardening seen in other parts of the world.

“I would describe market conditions as stable in the region but it is not a hard market,” he said.

One of the company’s goals in the region is to enable the use of alternative forms of risk transfer such as insurance-linked securities or cat bonds. “We are bringing ideas to the table on that front,” he said.

He added that Hannover Re is looking to bolster its offering on cyber and has hired experts in this realm. “We are looking at leveraging digital innovation by bringing expertise together,” he said.

One outcome of such innovation has been the development of parametric insurance products, which have been used for some years in the agricultural business. The company is now exploring ways to develop products that can be used to cover other risks including flood and heatwaves.

Pickel acknowledges that their ability to pay out quickly could help close the protection gap in some areas.

“Making claims liquidation easier and faster enhances the insurance offering and makes it easier for customers to conceive the outcome,” he said.

This could become more important in the context of climate change. “Flooding is the main threat in Asia in this context. Where risks are insurable, parametric insurance products can help make products more accessible and pay claims faster.”