Hannover Re’s E+S Rück sees improved conditions for P&C reinsurance in 2021

E+S Rück, Hannover Re's subsidiary responsible for the group's German business, expects prices to rise and conditions in the property and casualty (P&C) reinsurance market to improve in 2021 as COVID-19-related losses and low interest rates push prices up.

According to E+S Rück chief executive Michael Pickel, pandemic-related losses and intensification of the low interest rate environment have made price increases in primary insurance and reinsurance "absolutely essential".

For the coming year, the firm expects to see growing demand for reinsurance coverage from financially robust providers, as well as price adjustments in commercial and industrial lines, especially under loss-affected programmes. The reinsurer anticipates "attractive business opportunities" in the German market.

"The COVID-19 pandemic and legal disputes arising in this connection are again leading to substantial claims expenditures under legal protection insurance," said E+S Rück. "The trend towards an uptick in demand for reinsurance covers – which could already be discerned in the previous year – is therefore likely to be sustained."

"Along with the direct impacts of the pandemic, the renewed decline in interest rates is taking a toll on insurance industry profits. Price increases at primary insurers are therefore absolutely essential and adjustments are also needed on the reinsurance side," noted Pickel.

The reinsurer also expressed support for partnership-based solutions with the participation of public and private actors for the coverage of systemic risks such as pandemics.

"With an eye to future pandemic covers, it has become evident that the enormous costs associated with the global spread of diseases such as Covid-19 can only be borne by the insurance industry to a very limited extent overall," it said.

Therefore, primary insurers and reinsurers alike are expected to define the coverage of pandemics more clearly in their new contracts.