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12th September 2018
Hannover Re says market environment in worldwide property and casualty reinsurance remains challenging
The market environment in worldwide property and casualty reinsurance remains challenging, says Hannover Re. The enormous natural catastrophe losses of the past year led to an increase of reinsurance rates in affected regions and programmes, which however were lower than expected. At loss-free programmes, rates tend to stabilize.
Competition continues to be intense and is clearly shaping the pricing situation. At the same time, the capital resources available to most insurers can be described as good, as is also reflected in retention levels. These are still high, suppressing demand for reinsurance coverage. The ILS(insurance-linked securities) market also continues to provide considerable capacities, adding to the pressure on prices and conditions.
A gradual shift in sentiment can nevertheless be discerned in the industry. The results posted by some companies deteriorated sharply in 2017. Some reinsurers' results in 2018 were also impacted by follow-up losses from natural disasters. Furthermore, diminished run-off profits must be expected. Rising inflation-fuelled in part by new trade barriers-is pressuring the industry to increasingly implement rate adjustments in some segments.
Merely moderate rate increases overall have so far emerged out of the price negotiations within the year. In the case of natural catastrophe business, which had been hard hit in the previous year, more appreciable mark-ups were nevertheless recorded for loss-impacted treaties. All in all, the rate quality in the reinsurance market is slightly improved year-on-year, albeit remaining on a low while still adequate level.
"The further development of the loss amounts from last year's hurricanes as well as the minimal large losses incurred in the current year to date will be crucial in determining prices in property and casualty reinsurance", ceo Ulrich Wallin commented during a press conference in Monte Carlo. "The lower the strains from catastrophe losses turn out to be this year, the more difficult it will be to push through requisite additional price increases in the coming year. Nevertheless, we are seeing strong demand and hence rather favourable opportunities for growth in certain segments."
Hannover Re anticipates increasing demand in, among other areas, covers for cyber risks as well as solutions designed to provide solvency relief under structured reinsurance.
For the treaty renewals as at 1st January 2019 the Group therefore expects-despite the overabundance of reinsurance capacity-stable prices and conditions for the most part. Similarly, an industry-wide softening in profitability as well as a higher burden of attritional losses point to a need for improved market conditions.
Hannover Re Trends(189 articles)