Hannover Re sees loss-driven rate rises
Rates will harden in some lines of business hit by loss events such as the Ogden rate change in the UK motor market, and nat cat in North America due to an above-average hurricane activity, according to Hannover Re.
“The market has throughout the period of softening retained its ability to respond to loss-making business and increase rates,” Hannover Re CEO Ulrich Wallin said at the Rendez-Vous in Monte Carlo.
In UK motor business a change to the personal injury Ogden discount rate resulted in substantially higher loss-loads to the programmes.
The market reacted to the Ogden rate change, Wallin said, noting that Hannover Re expects significant rate increases in UK motor business. As one of the market leaders in this line, the company is confident of being able to benefit more than the average from this development, he said.
Wallin does not foresee a market dislocation in the renewals, but the hurricane season may change that, especially if more hurricanes emerge. The season goes until the end of November and climate conditions seem to be quite conducive for hurricanes, he noted.
In North America, Hannover Re expects a surge in demand for flood insurance on both the insurance and the reinsurance markets.
Overall, Hannover Re expects stable treaty renewals at January 1. This is especially true of North America in the wake of recent natural catastrophe events such as Hurricane Harvey. Furthermore, weaker earnings industry-wide and the increased burden of attritional losses point to an improvement in market conditions.
Pricing is essentially determined by intense competition; despite poorer business results in some areas and the erosion of reserves, many companies have healthy capital resources, Wallin noted.
Relatively low inflation is also a supportive factor. Stronger demand can nevertheless be observed not only in certain parts of Asia and North America but also in specific lines such as cyber, some specialty lines and for covers taken out for capital management purposes, the company said.
Opportunities should open up above all in US property and casualty business, where prices have firmed. In addition, the company anticipates potential for further growth in the area of motor covers in the UK, in credit and surety business and from covers taken out for capital management purposes following the implementation of risk-based solvency systems.
Hannover Re expects natural catastrophe business to bottom out as a consequence of the active hurricane season.
Get the latest re/insurance news sent to your inbox every day - Sign up to our free email newsletters
Today’s Monte Carlo stories
Greenlight to benefit from market turn
Schroders launches ILS life fund; Lohmann mulls effect of buffer clauses
Swiss Re CEO warns on true risk of cyber cover
Irma wake-up call will propel rates in right direction: Markel
Pool Re gets green light to cover cyber
Limited expertise in cyber is a concern
NFIP reform could pave way for private market to participate
Reinsurers will need to ponder options if Irma becomes capital event
Swiss Re CEO’s vision for insurance
PERILS aims to be the ‘one-stop agency’ for nat cat data
Irma to have impact on US property rates
Leadenhall earns seat with the big boys
