Hannover Re expects prices and T&Cs to improve in remainder of 2019 and 2020

In the 2019 renewals negotiations so far, reinsurers have seen improvements in rates and prices compared to the previous, heavily loss-affected years.

That is according to Sven Althoff, a member of Hannover Re’s executive board since 2014, who told Monte Carlo Today that it will be interesting to see if this trend continues in the coming renewals.

“The margins right now are still not justifying a significant expansion of business in most areas,” Althoff said.

Hannover Re intends to maintain its emphasis on a selective underwriting policy which prioritises minimum margin requirements over premium growth, he said, but added that “strengthening relations with existing customers” would be another driver in the upcoming renewals negotiations.

The company has seen the property/casualty reinsurance market regain some ground on rates and terms and conditions from an underwriting and pricing perspective.

But again, Althoff emphasised, while this helps reinsurers to continue writing the existing business at improved prices and conditions, “margins are still not justifying a significant expansion for us”.

“Based on the most recent renewals and a market environment that has become even more challenging with the further drop in interest rates, we are expecting further improvements of prices and conditions for both insurers and reinsurers,” he said.

Althoff agreed with many in the market that there still is a lot of capacity, but added that “in my view, the renewals in June and July saw a more rational behaviour in the market from both sides, from both traditional reinsurance capital and from providers of alternative capital”.

“We are observing a good positive momentum for rate increases on the insurance side, which is broader in scope from a territorial and a products perspective compared to the reinsurance market.

“I expect reinsurance prices and conditions to continue to improve through the remainder of 2019 and well into 2020. I also expect that to happen on a wider scale than during the past years where most of the price reaction was limited to loss-affected lines of business,” he said.

He agreed with industry consensus that reinsurance mergers and acquisitions (M&A) would continue. “The M&A will not necessarily increase, however, partly because a reinsurer’s size matters more than before as clients reduce their reinsurance panels, and demand for tailor-made reinsurance is on the rise.,” he concluded.