Rates are rising sustainably on all lines: Hannover Re

Almost all lines of business are seeing rate increases as well as greater underwriting discipline something that reinsurers have not seen for many years.

That is according to Axel Freiboth, managing director and chief underwriting officer of the North American treaty Division of Hannover Re, who told APCIA Today that this is being driven by a number of factors which, combined, should also mean that the change in the market is sustainable.

“This is due to multiple factors including the low interest rate environment and an uptick in inflation, which is where the ceding companies are feeling a little bit of pain, but we do see that uplift in rates at a continuous pace,” Freiboth said.

“That will obviously translate into the reinsurance market and we do see that as a more sustained rate uptick over the course of the next several months and it’s likely we are going to see that continuing into 2020.”

He added that other factors are driving rate changes in the market, including increasing exposures, a better understanding of accumulations for property risk, and cyber exposures. Furthermore, he thinks rate increases are going hand-in-hand with tighter limits management, which is also a positive sign for the industry.

According to Freiboth, the current market cycle is an interesting one. While certain lines of business have seen sharp increases, for the most part the rate hikes are not big jumps, but a continuous, consistent increase in rates, which he said was more sustainable.

Freiboth added that Hannover Re had seen increases in almost all lines of business, with the exception of workers’ compensation.

“In all other lines of business we see a gradual increase, which is quite different from particular areas spiking up after a large loss event, as we have seen in the past. This is definitely a sign of the overall pressure on the insurance market in terms of the low interest rate environment and also an uptick in inflation.

“We see evidence of similar increases on the reinsurance end obviously the reinsurance market will benefit from the uptick in insurance rates. We are also seeing, particularly in property lines, increases from the wildfires.

“In addition, losses from Hurricane Dorian are going to put pressure on storm rates in the south east of the US.”