A “flight to quality” is increasingly being seen in many regions and lines of business in the reinsurance sector, according to Jean-Jacques Henchoz, chief executive officer of Hannover Re.
Speaking in a Hannover Re conference call on September 14, Henchoz highlighted the increased client demand for coverage from high quality reinsurers with above average rating and capital positions.
“This will be an important driver of reinsurance purchasing decisions in 2021 and Hannover Re is very well positioned to benefit from this situation,” he said.
Hannover Re expects to see significant price increases spanning the various lines of property and casualty reinsurance in the treaty renewals as at January 1 2021. The key drivers here are the strains incurred by primary insurers and reinsurers in connection with the COVID-19 pandemic, a further drop in interest rate levels and the large losses recorded over the past three years.
“Our sympathies go out to everyone who has lost family or friends or been impacted by the virus in any other way,” Henchoz said.
“We stand shoulder to shoulder with our customers and emphasise sustained, partnership-based relationships. Our business model and our capital resources are geared to managing extreme scenarios.
“Low interest rates are here to stay for a long time. This necessitates considerable pricing discipline, because technical profitability will have to do even more to offset declines in investment income.
“With this in mind, price increases on both the insurance and reinsurance side are absolutely essential in January and beyond.”
Along with generally stronger demand for high-quality reinsurance protection, he noted that primary insurers are increasingly seeking tailor-made solutions offering solvency relief. This is where reinsurers with a particularly large risk-carrying capacity and above-average ratings have a pivotal role to play.
In the various rounds of renewals held during 2020 Hannover Re secured improved conditions and price increases in some areas. Particularly for treaties that had suffered losses, price increases mostly running into double-digit percentages were obtained.
Owing to the low interest rates, however, these are not always technically adequate and the company said further price increases are therefore needed.
Also speaking in Monday’s conference call, Sven Althoff, member of the executive board–property & casualty, noted several key emerging risks that present areas of opportunity.
“In the context of Asia, increased penetration of insurance on the short-term health side is happening in many countries,” he said, adding that with the ongoing economic development of emerging countries, the same goes for personal lines business.
“You have a growing middle class and they are protecting their assets which they have worked very hard to achieve,” Althoff said.
“Cyber has been a topic for a number of years now and we are seeing more and more cyber buying, which is good from a risk management and diversification point of view.
“It’s not all about North America these days, even though that clearly is still the biggest cyber insurance market, but Europe and parts of Asia are also catching up.
“Last but not least, with climate change and the move to more sources of energy solar and tidal for example this also comes with new risks and the industry is happy to support that development,” he concluded.
Hannover Re, Monte Carlo 2020, Insurance, Reinsurance, Jean-Jacques Henchoz, Europe