Reinsurance market outlook ‘promising’ but more price rises needed to offset losses: Hannover Re
Further improvements in conditions and rates are needed for the year ahead in response to the multi-layered challenges posed by large catastrophe losses, pandemic expenditures and the low interest rate level as well as the increasingly intense pressure on margins, according to Hannover Re.
The reinsurer anticipates a continuing trend towards higher prices and improved conditions in property and casualty reinsurance for the various rounds of renewals in 2022.
Over the last five years the market has experienced a sustained high volume of natural catastrophe events. In response to the elevated loss experience, reinsurance markets have increasingly hardened around the world in previous years and again in 2021.
Moreover, above-average large losses from nat cat events such as the recent flooding seen in Europe and Hurricane Ida have further increased the need for action on the part of reinsurers.
"In property and casualty reinsurance there is a need for further rate increases. Only in this way will reinsurers be able to provide reliable risk protection in an increasingly challenging environment," said Jean-Jacques Henchoz (pictued), chief executive officer of Hannover Re.
"Particularly where natural catastrophe risks are concerned, adjustments are unavoidable," he added. "While the pace of price increases has slowed somewhat of late in the renewals during the year, this was primarily the case in areas where substantial increases had already been recorded in prior years."
For P&C reinsurance treaty renewals as at 1 January 2022, Hannover Re expects the positive pricing trend to continue, especially in loss-affected lines and regions.
At the same time, conditions are also likely to show further improvement on account of the considerable uncertainties, most notably in relation to future pandemics and cyber attacks, it noted. Rates are holding steady or moving slightly higher globally.
Hannover Re highlighted that given the uncertainties prevailing on the markets and added boost in demand for high-quality reinsurance protection, reinsurers with a top-notch rating and particularly extensive risk-carrying capacity have a pivotal role to play.
Overall, the reinsurer sees a "promising" outlook for the market for 2022, with pricing level set to continue its upward trajectory. But, noted that further adjustments are needed in terms of disciplined underwriting approach, customer-centricity focused on long-term partnerships and tailored solutions by insurers and reinsurers in this dynamic market phase.
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