- Strong underwriting discipline prompts hardening trend on non-life reinsurance market
- Significant price increases, especially in property catastrophe business, owing to heavy loss expenditure in 2011
- No further rate erosion in casualty business
Hannover, 1 February 2012:
Hannover Re expressed satisfaction with the outcome of the treaty renewals in non-life reinsurance as at 1 January 2012. "We achieved better conditions and rates on average than in the previous year. In segments impacted by natural catastrophes the price increases were, as anticipated, particularly marked. Yet it is still too soon to speak of a hard market across the board in non-life reinsurance", Chief Executive Officer Ulrich Wallin remarked.
Of the total premium volume booked in the previous year in non-life reinsurance (excluding facultative business and structured reinsurance) amounting to EUR 5,485 million, roughly two-thirds of the treaties with a volume of altogether EUR 3,477 million (63%) were up for renewal as at 1 January 2012. Of this, a premium volume of EUR 3,130 million was renewed, while treaties worth EUR 347 million were either cancelled or renewed in modified form. Including increases of EUR 563 million from new or modified treaties and thanks to improved prices, the total renewed premium volume came in at EUR 3,693 million – equivalent to growth of 6%.
The treaty renewals again demonstrated the considerable importance that ceding companies continue to attach to a reinsurer's financial strength. A very good rating is a prerequisite for a reinsurer if it is to be offered and awarded the entire spectrum of business. With its excellent ratings ("AA-" from Standard & Poor's, "stable" outlook, and "A" from A.M. Best, "positive" outlook), Hannover Re is one of the reinsurers that meets this requirement.
The renewals for business in Germany passed off better than expected. Developments in motor insurance were very pleasing; the persistent premium erosion in this area has come to an end. The hail events in August and September 2011 as well as losses from prior years helped to push premiums higher in own damage business. The total premium volume for German business increased by 3%, also thanks to an enlarged customer base.
In North America the treaty renewals were satisfactory overall; not quite 50% of the portfolio was up for renewal in this region. In US property business it was for the most part possible to obtain higher rates. Price increases of up to 30% were attainable for loss-impacted programmes. In US casualty business the rate erosion was halted. Particularly pleasing was the situation in Canada, where on the whole sizeable rate increases were secured. The premium volume for total business in North America grew by around 7% as at 1 January 2012.
The treaty renewals in marine business passed off satisfactorily; rates remained largely stable. In the offshore energy sector Hannover Re booked rate increases – which were in fact considerable under programmes that had suffered losses. The company boosted its premium volume by 12% in the treaty renewals. In aviation reinsurance rate erosion was observed in both primary insurance and reinsurance on account of the good underwriting results recorded in prior years. The business nevertheless continues to be attractive, prompting the company to enlarge its premium volume. The outcome of the renewals in credit and surety reinsurance – where around 75% of the portfolio was renewed – was satisfactory for Hannover Re. Rates here declined slightly on the back of the pleasing loss ratios seen in recent years. The premium volume grew in view of larger shares written with our key accounts.
The picture in global reinsurance business was a mixed one. The total premium volume grew by 8%. In developed markets the portfolio remained broadly stable, while in Asia and the Middle East further appreciable growth was booked. The most marked changes were observed in property catastrophe business. In light of the substantial loss expenditure from natural catastrophes in the previous year, prices for reinsurance covers improved significantly. In Australia, for example, prices soared by 60% on average; the increase in the United States was in the lower double digits. Hannover Re is looking to further sizeable rate increases for the 1 April 2012 renewal date in Japan and in the New Zealand renewals.
In view of the pleasing outcome of the treaty renewals as at 1 January 2012 and against the backdrop of slight hardening on the market, Hannover Re anticipates a good financial year in non-life reinsurance. "We also expect to see further rate increases in the treaty renewals during 2012, when a good third of our non-life reinsurance portfolio is renegotiated. All in all, we should enjoy continued profitable growth", Mr. Wallin confirmed.
Hannover Re has budgeted EUR 560 million for major losses incurred in the current financial year, as against an amount of EUR 530 million in the previous year. This increase reflects inter alia the enlarged premium volume in non-life reinsurance and the rise in insured values.