Hannover Re anticipates improved global reinsurance market terms and conditions to reflect rising loss costs

  • Geopolitical uncertainties, sustained high rates of inflation and rising costs from large losses are likely to result in further improvements in prices and conditions
  • Growing protection gaps in areas such as natural catastrophe and cyber risks drive demand for innovative solutions
  • Proportional reinsurance benefiting from improved prices in some primary insurance business lines
  • State of the market in non-proportional reinsurance continues to be attractive

Monte Carlo, 11 September 2023: Hannover Re anticipates further price increases and improvements in terms and conditions in the renewals at 1 January 2024 in property and casualty reinsurance.

This can be attributed to ongoing geopolitical uncertainties, the increasing frequency and severity of natural catastrophe losses as well as unchanged high inflation rates and social inflation. Loss payments of insurers and reinsurers alike have consequently risen sharply and Hannover Re anticipates the long-standing trend towards higher expenditures to be sustained.

"We have achieved significantly more adequate prices and conditions during this year’s renewals. However, these improvements are not sufficient in view of the still challenging risk situation," said Jean-Jacques Henchoz, Chief Executive Officer of Hannover Re. "Adequate pricing is a prerequisite for us to offer the best possible reinsurance capacity. As we want to grow with our clients and help closing protection gaps, we will also put an emphasis on innovation in order to allow our clients to transfer risks both through traditional reinsurance and tailored solutions."

The company's capitalisation, measured by the capital adequacy ratio under Solvency II of 270% at the end of June, remains very resilient. The rating agencies continue to confirm Hannover Re's very good financial strength. It is rated "AA-" by Standard & Poor's and "A+" by A.M. Best. Both ratings have a stable outlook.

"Over the course of the year, we have seen increasing exposures from man-made losses. We expect this trend to continue, so that, amongst others, political or cyber risks will increasingly become the focus of future renewals. At the same time, we will keep an eye on the more frequently occurring secondary natural catastrophe perils," said Sven Althoff, a member of Hannover Re's Executive Board with responsibility for property and casualty reinsurance. "Thanks to our outstanding risk and capital management, we are optimally placed to reliably support our clients even in this challenging market phase."

Specifically, Hannover Re anticipates the following developments in the treaty renewals at 1 January 2024:


Extreme weather events once again took a toll on the insurance industry in Europe this summer. While southern Europe experienced a protracted heatwave with record temperatures soaring to almost 50 degrees Celsius, countries including Slovenia, Austria, Italy and Germany were impacted by heavy rain, windstorms and hail during the summer.

The costs associated with the effects of climate change combined with high inflation added to the pressure for adjustments to prices and conditions.

What is more, motor insurance in Germany – the largest property insurance line by volume – was clearly unprofitable again this year on account of increasing repair costs and claims frequencies. Coverage for cyber risks looks to be stabilising on a higher level after years of substantial price increases. All in all, against the backdrop of protracted high inflation and growing exposures, Hannover Re anticipates further adjustments to terms and conditions in German property business, especially for natural catastrophe covers.

In the United Kingdom and Ireland rate increases were again recorded on the primary market over the course of the year. While in some liability lines, such as directors' and officers' insurance or cyber covers, the potential for further increases should be limited after the price rises of previous years, appreciable rate improvements are still being seen in property and motor business. Russia's war of aggression in Ukraine also prompted insurers and reinsurers to take a close look at London market covers from the terrorism and political risks segment. So far, a substantial hardening of prices and conditions could be observed.

France, too, is seeing further market hardening. Natural catastrophe events such as exceptional heatwaves, droughts and hail damage were again a concern for the insurance industry this year. In terms of man-made losses, the riots in June and July and associated losses are especially noteworthy.

The markets in Central and Eastern Europe with natural catastrophe exposure were particularly affected by the devastating earthquake in the neighbouring region of Türkiye and Syria, which could lead to significant price increases as a result. In addition, extraordinary losses were reflected in business interruption insurance due to supply chain shortages and due to high inflation.

North America

The hard market phase in North America continues, especially in property business. Rising primary insurance rates as well as adjustments to sums insured and retentions are leading to further improvements in reinsurance premiums.

The loss experience was driven by a number of local windstorm events and the devastating fires in Hawaii. The increasing frequency of mid-sized losses, which has been ongoing for years now, is particularly challenging for insurers writing business on a regional basis. Both in Florida and California regulatory challenges to necessary price adjustments have also led to a decline in primary insurance capacity.

Coastal regions with rising insured values find themselves particularly challenged by the impacts of climate change. Combined with a higher frequency of mid-sized losses, the future profitability of the property and liability lines is therefore under pressure. In this respect, a continuation of the price increases can also be observed for loss-free reinsurance contracts.

Social inflation is becoming an increasingly challenging issue for insurers. Following the phasing out of pandemic-related restrictions, individual claims payments have now significantly exceeded the long-term average, which could increase the pressure on insurers and reinsurers for adjustments in the casualty segment. Furthermore, the effects of litigation financing also continue to have an impact on the legal environment creating additional pressures.

Latin America

Latin American economies are experiencing a varied pace of recovery following the setbacks caused by the pandemic and natural disasters in recent years.

For primary insurers, there are signs of healthy rate growth in many lines. As demand for reinsurance coverage increases while at the same time reinsurance capacity for natural catastrophe risks stays relatively stable or even becomes tighter for some of the perils, the protection gap is widening.


In China and India, Hannover Re secured better prices and conditions in the renewals during the current year, especially for non-proportional reinsurance treaties. Despite a comparatively modest burden of natural catastrophe losses in the past two years, the impacts of climate change are also being clearly felt.

In Australia and New Zealand the upward price trajectory was again maintained during the main renewal date as at 1 July. Flooding and windstorm losses in New Zealand gave added support to this pricing trend, in some cases leading to substantial adjustments.

Hannover Re also anticipates improved prices and conditions in the other Asian markets. Primary insurers were only able to negotiate improvements in certain markets. A number of insurers will therefore likely further raise their retentions to counter any increased cost of reinsurance covers, especially in natural catastrophe business.

Natural catastrophe business

The trend towards costlier climate-related catastrophe losses was sustained in 2022 and 2023. Most notably, Hurricane Ian had considerable implications for the global reinsurance market and contributed to further hardening in the most recent rounds of renewals. The accelerating pace of climate change is likely driving the proliferation of extreme weather events such as tropical cyclones, heatwaves and winter frost, extreme rainfall, wildfires and severe convective storms in many parts of the world. The economic and insured losses from these catastrophic events are further exacerbated by the inflationary increase in claims costs.

Going into 2024, Hannover Re anticipates the following developments in key markets for natural catastrophe risks – based on the assumption of no further market-changing events prior to year-end:

North America: While the losses related to the US hurricane season cannot yet be finally assessed, a large number of rather expensive convective storms, the fires in Hawaii, and the inflation-driven rise in the costs of reconstruction have so far taken a heavy toll on the market. Regulators in some US states are trying to protect policyholders against cost increases or coverage restrictions. This has made it more difficult for primary insurers to achieve rate increases. Hannover Re expects demand for reinsurance capacity to rise through 2024 and beyond. In Florida, Hannover Re will continue to write business conservatively unless reinsurance terms and conditions improve appreciably.

Europe: Having long been spared any significant catastrophic events, European markets have seen changes in recent years. Natural catastrophe losses and sustained inflation will continue to drive reinsurance demand and prices for European catastrophe business higher in the current year.

It can be observed that prices in the reinsurance market have increased in response to run-off losses on flood damage claims. Given that inflation is also driving up the need for insurance in Europe, Hannover Re anticipates stronger demand for reinsurance capacity.

Japan: Significant rate increases were obtained in the 1 April renewals. With a view to mitigating the effects of higher prices on reinsurance budgets, primary insurers have raised their retentions, moved away from aggregate covers or otherwise restructured their programmes. Hannover Re expects demand for reinsurance capacities in Japan to grow moderately because its clients factor in their growing exposure and price inflation.

Australia/New Zealand: The effects of climate change appear to be particularly evident in Australia and New Zealand. After years of exceptionally damaging natural disasters, the reinsurance market was particularly impacted this year by severe flooding in Auckland and Cyclone Gabrielle early in 2023. Based on the experience of these catastrophic events, prices continued to climb while demand for reinsurance capacity remained high. Further price increases should follow in 2024. As an additional factor, the 1 July renewals saw the Australian cyclone pool come into effect for primary insurers with cyclone exposure. Demand for natural catastrophe covers stabilised accordingly. In view of the sustained high level of inflation, however, Hannover Re anticipates further demand for reinsurance protection.

Specialty lines

The improving price trend in aviation reinsurance was sustained. Significant improvements in terms and conditions were also obtained, particularly in response to the war in Ukraine.

On the primary insurance market, no indications of a trend reversal could be discerned so far in the airline segment after the rate erosion of the previous year. Very substantial improvements in prices and conditions were, however, recorded for coverage of war risks in light of the uncertainty arising out of pending international court proceedings.

On the whole, Hannover Re anticipates the positive pricing momentum in aviation reinsurance to be sustained for 2024. Due to the comparatively better starting position, rate increases might not fully live up to the level of the previous year.

The market for space covers in 2024 will be shaped by the roll-out of new launch vehicles as well as fewer, albeit more expensive satellite launches. Despite the unchanged availability of capacity, prices and conditions should be sufficiently sustainable in order to meet Hannover Re's profitability requirements.

Marine business is facing geopolitical challenges, among other things. These include possible losses from the war in Ukraine. In this regard, following expiry of a 12-month time period the first claims for merchant vessels trapped in Ukrainian ports have been settled by Hannover Re’s clients. A potential for losses under covers for political risks currently remains unclear due to the ongoing war. In addition, the fire on board the vehicle carrier "Fremantle Highway" in the North Sea resulted in corresponding loss expenditures. Against the backdrop of these developments, it was possible to achieve significant price increases, programme restructuring and higher retentions with clients in the various renewals throughout the year. This trend looks set to continue in 2024.

Loss ratios in credit and surety insurance as well as in the area of political risks were slightly higher than in the previous years, but still below the multi-year average. In light of a progressive economic slowdown, however, increasing loss expenditure can be expected in the months ahead. With this in mind, Hannover Re anticipates prices on both insurance and reinsurance to remain stable or even rise slightly.

When it comes to agricultural risks, demand for insurance and reinsurance solutions is expected to keep on growing. The heavy losses of recent years have led to shortage in capacity, while at the same time boosting demand for reinsurance protection. The resulting price increases and further improvements in terms and conditions have led to greater profitability overall in the agricultural segment. The exposure to certain risks and regions, such as insurance for bushfires in Australia and wildfires in Chile, has been scaled back. Hannover Re offers its clients protection through both traditional reinsurance and innovative insurance solutions such as parametric covers.

The market for cyber insurance is still facing capacity shortage due to increasing losses from cyber-attacks and greater risk awareness. Reduced limits offered by insurers and reinsurers along with further significant improvements in prices and conditions were observable. Hannover Re is working with clients and capital market participants in order to offer additional capacity. Earlier this year, Hannover Re succeeded with its first transfer of cyber risks to the capital market through a quota share cession, enabling it to maintain its important position in this growing market.

Hannover Re makes use of the insurance-linked securities (ILS) market not only to obtain coverage for its own catastrophe risks but also to transfer property and casualty and life and health reinsurance risks for its clients to the capital market. To a considerable extent this takes the form of collateralised reinsurance, which remains the largest ILS segment and posted further growth. In addition, Hannover Re was once again able to transfer several catastrophe bonds to the capital market for its clients. Covers were placed against losses from natural catastrophes including floods, windstorms and earthquakes.

Demand for tailor-made solutions in the area of structured reinsurance remains brisk, benefiting Hannover Re thanks to its leading market position. The premium volume booked by Hannover Re in this segment has now reached roughly EUR 5 billion. Since the lower capital requirements reflect lower loss volatility, structured reinsurance continues to offer in Hannover Re’s view significant potential for profitable growth.

Hannover Re is one of the world’s leading reinsurers. It transacts all lines of property & casualty and life & health reinsurance and is present worldwide with more than 3,500 staff. German business of the Hannover Re Group is written by the subsidiary E+S Rück. Established in 1966, Hannover Re is recognised as a reliable partner for innovative risk solutions, exceptional customer intimacy and financial soundness. The rating agencies most relevant to the insurance industry have awarded both Hannover Re and E+S Rück outstanding financial strength ratings: Standard & Poor's AA- "Very Strong" and A.M. Best A+ "Superior".

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