Hannover Re cuts retrocessional coverage in ‘challenging’ January renewals
Hannover Re reduced its retrocessional coverage during a "challenging" January renewals season, partially motivating the group's decision to increase its large loss budget for 2022, top officials said.
"Renewal of our retrocessional programme was a little more challenging than in previous years," an official said during a call hosted by CEO Jean-Jacques Henchoz (pictured) and Sven Althoff, board member for P&C.
"We decided in the end to buy a little less limit, thus increasing our potential net loss position," the official said.
That increase in net loss exposure plus sensitivity to inflation and likely rate growth at pending renewal deadlines all worked together to motivate a €100 million increase in the planned large loss budget, officials noted. Hannover Re had previously signaled a likely €1.3 billion figure in its first presented of 2022 guidance in late 2021.
Higher inflation readings and the impact on underlying asset values "is something we wanted to take into account," the official said.
Rate gains at April and July renewal deadlines may also push towards higher exposures, they suggested. "We expect that the pricing trends continue to be positive for the remainder of the year, so we can expect that our April and July renewals will show further rate increase compared to January 1."
"Take that all together and we decided to increase the budget," the official said.
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