Hannover Re sees growth in nat cat but also in protection gap, says CEO Henchoz

Nat cat is a big topic for the industry, Hannover Re chief executive officer Jean Jacques Henchoz said at a press conference in Monte Carlo, highlighting how struck he was by the strength of Hurricane Dorian.

“Dorian shows how relevant our industry is to helping our customers to rebuild, pay claims very quickly and help communities,” he said.

He added that although Dorian will not end up being a very costly nat cat event for the industry, it is still a reminder of how disastrous these events can be and how quickly they can evolve.

“The hurricane season is not over—there are storms forming as we speak, and typhoons in Japan. We will see by the end of the year where we stand as an industry.”

On one hand, Henchoz said, the nat cat line of business is growing and it’s an opportunity for the industry, but on the other hand the protection gap has been growing in the last few years, which have been very active in terms of events with hurricanes, wildfires and typhoons.

“The protection gap is a concern because it’s potentially a reputational risk for the whole industry. Many of these disasters are not compensated by claims payments from the industry,” he said.

“Narrowing the protection gap should remain a big imperative for the industry.”
The reinsurer confirmed it was “on course” for further profitable growth in P&C reinsurance. The firm expects improved prices and conditions for the 2020 renewals. The nat cat losses have prompted price increases across multiple segments, while lower interest rates require underwriting discipline.

The challenges of surplus capacity and historically low interest rates continue to dog the industry, although Henchoz welcomed the pleasing turn that prices and conditions have taken in 2019 compared to a year earlier. However, he said, there was “still a way to go in the US”.

Hannover Re acknowledged that the effects of the recovery are still muted.
Henchoz highlighted growth opportunities in Asia-Pacific, particularly China and in Latin America.

“In recent months we have been able to secure initial price increases across the board. The renewed drop in interest rates and the considerable strains from large losses underscore the need for improved prices and conditions in the upcoming year’s renewals.

“Given the challenging market environment we shall continue to keep a very close eye on price and risk adequacy and will put profitability before growth,” he concluded.