DGAP-News: Hannover Rück SE: Despite a competitive environment Hannover Re expects treaty conditions to be commensurate with the risks in the treaty renewals as at 1 January 2014
(firmenpresse) - DGAP-News: Hannover Rück SE / Key word(s): Miscellaneous
Hannover Rück SE: Despite a competitive environment Hannover Re
expects treaty conditions to be commensurate with the risks in the
treaty renewals as at 1 January 2014
09.09.2013 / 09:00
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Despite a competitive environment Hannover Re expects treaty conditions to
be commensurate with the risks in the treaty renewals as at 1 January 2014
Monte Carlo, 9 September 2013: Competitive pressure intensified in some
reinsurance lines on the back of the favourable outcome of the treaty
renewals as at 1 January 2013. This is especially true of US property
catastrophe business. Sustained good results posted by insurers and
additional capacities from the market for catastrophe bonds prompted
corresponding rate reductions. Yet in most cases the rate level was still
commensurate with the risks. For Hannover Re the decrease in margins has
limited implications, since the company's market share of US catastrophe
covers is disproportionately low.
Owing to the protracted low level of interest rates and the associated drop
in investment income, discipline on the technical pricing side remains very
high.
'In recent renewals we continued to pursue our selective underwriting
policy and have systematically written only business that satisfies our
margin requirements', Chief Executive Officer Ulrich Wallin emphasised
during a press conference in Monte Carlo. Going forward, Hannover Re sees a
continued stable need on the part of its clients for high-quality
reinsurance protection. This is true not only of mature markets but also
growth markets in Asia and Latin America as well as business with
agricultural risks.
Looking ahead to the upcoming renewal phases, Hannover Re expects to be
able to achieve conditions that appropriately reflect the risks. Demand for
reinsurance protection should be stable overall. This expectation is
supported by the rising concentrations of values in urban conurbations and
by the adoption of risk-based solvency systems in Europe and Asia. The most
recent flood events in Europe and Canada should at least have a stabilising
effect on rates. The loss experience from natural catastrophes until
year-end will be a particularly crucial factor in price movements.
Hannover Re expects the three pillars of its non-life reinsurance portfolio
- target markets, specialty lines and global reinsurance - to develop as
explained below in the treaty renewals as at 1 January 2014:
I. Target markets:
North America
On the whole, the upturn on the North American primary insurance market has
been sustained, with rates set to rise further. While non-proportional
business has been affected only indirectly, the reinsurance market has
profited directly in the area of proportional acceptances. Hannover Re has
boosted its property business here by around 10%. The company has
maintained its well diversified, non-proportional book of business on a
high level.
Casualty business has seen rate increases for two years now, most recently
in the range of 5% to 10%. Reinsurance prices in non-proportional casualty
business, on the other hand, have been stable. Despite the continued
prevailing trend among some US insurers to raise their retentions, HannoverRe has enjoyed adequate opportunities to gradually enlarge its portfolio.
Germany
While the rehabilitation efforts in motor insurance - which are likely to
continue in 2014 - are showing further progress, particularly heavy losses
have been recorded in the own damage lines in the current year. Both the
flooding in June and severe localised hail events in a number of federal
states led to appreciable losses for insurers and reinsurers alike.
Homeowners' insurance, which has been running at a loss for years, was also
impacted by these events, as a consequence of which the steps being taken
to restore this line to profitability failed to bring relief.
Industrial and commercial insurance lines have fared better so far than in
the previous year; there were still, however, no indications of a long
overdue improvement in premiums.
In view of the heavy loss expenditure incurred to date, considerable
improvements in conditions are anticipated for the German market on 1
January 2014.
II. Specialty lines:
Aviation
The increase in available capacities on the direct market has continued in
2013. This development, combined with the absence of sizeable major losses,
is putting the already low price level under strain. Despite a higher
claims frequency in 2013, especially in hull business, a significant
improvement in the market climate cannot therefore be expected. As one of
the leading markets for aviation reinsurance, Hannover Re sees further good
business opportunities in this environment.
Marine
The hard market climate in marine reinsurance should be sustained. The
deteriorations subsequently reported by clients in their losses from
Hurricane Sandy during the current year have not been reflected in the
reinsurance programmes so far and will be priced into the renewals.
Furthermore, higher salvage costs for the 'Costa Concordia' as well as
increased liability claims will cause conditions to harden under the
affected programmes. Even though the reinsurance of offshore energy risks
has not to date been impacted by major losses in 2013, a stable price level
is expected here.
Credit and surety
Following exceptionally low claims activity over the past three years, loss
ratios in credit and especially surety insurance climbed on account of the
slowdown in economic growth around the world. Loss ratios in the area of
political risks remained unchanged on a good level. It is anticipated that
insurance and reinsurance prices will remain broadly stable.
Insurance-Linked Securities
Hannover Re continues to use - as it has in the past - the capital market
to protect against peak exposures. It is also increasingly the case that
interesting opportunities are available here to generate low-risk, stable
margins for Hannover Re, such as through the provision of services
(fronting and transformation). To this end the company works together with
carefully chosen specialised ILS investors, for example by fronting
business selected by an investor and then passing it on in packaged form to
this investor. In view of the advantageous situation enjoyed both by the
investor and the reinsurer/insurer, Hannover Re anticipates steadily
growing demand over the coming years.
Structured reinsurance/Advanced Solutions
In light of the adoption of risk-based models for calculating solvency
requirements within and beyond the borders of the European Union, Hannover
Re expects to expand this business. Demand for innovative and tailor-made
reinsurance solutions is likely to continue rising. This development
includes aggregate covers, which protect the net retention of clients
against significant loss scenarios with a low probability of occurrence.
III. Global reinsurance:
Global catastrophe business
Global catastrophe business has experienced further price erosion in the
course of 2013, driven especially in North America by capacities made
available in the ILS market. Prices for natural catastrophe covers are
nevertheless still on a good level and the attainable margins are broadly
adequate. Hannover Re expects the individual markets to develop as follows:North America: While price increases are anticipated in Canada in the
aftermath of the flood events, rates in the United States are likely to
decline further in some segments owing to an adequate supply of capacity.
Particularly marked of late was the drop in prices for business in Florida,
with further movements here dependent on how costly the present hurricane
season proves to be. The implications for Hannover Re, which writes only a
modest portfolio in Florida, are limited.
Europe: Slight rate erosion was initially recorded in the current year. The
severe floods in Germany and other European countries as well as hail
events will nevertheless likely prompt rate increases. Hannover Re expects
prices for the next renewals to be risk-appropriate from a technical
standpoint.
Japan: In light of the major losses incurred in prior years, the price
level is still comparatively high; rates have barely budged within the
year. The company takes a positive view of the coming year too and expects
to see stability here.
Australia/New Zealand: The good price level in both markets was broadly
maintained in the 2013 renewals. Hannover Re does not expect to see any
changes on the pricing side or structurally in the year ahead.
Treaty reinsurance worldwide
Developments in worldwide treaty reinsurance varied across markets and
regions:
Emerging markets: Emerging markets continue to offer substantial growth
potential, even though the pace of their economic expansion has slowed
somewhat of late. In view of rising demand for high-quality reinsurance
protection - inter alia as a consequence of the flood damage in Central and
Eastern Europe - Hannover Re is looking to above-average growth rates and
consistently very healthy profitability.
Agricultural covers: The growing need for agricultural commodities and
foodstuffs as well as the increased prevalence of extreme weather events
are boosting demand for agricultural covers, above all in emerging and
developing markets. Yet the latest natural disasters in Europe should also
generate further interest in protecting against potential crop failures.
The drought in North America during 2012 is expected to be reflected in
further rate hikes. All in all, an increasingly diverse and innovative
product range will open up greater opportunities to generate profitable
business with agricultural covers.
Outlook
Hannover Re anticipates a competitive climate, in some cases with
corresponding implications for conditions in reinsurance treaties. The
market nevertheless remains in a position to respond to losses with rate
increases. With this in mind, the company continues to have confidence in
its systematic cycle management coupled with strict underwriting
discipline. In this context it concentrates its acceptances exclusively on
business that meets the required margins. In areas where markets are
attractive Hannover Re intends to enlarge its portfolio. This is expected
to be the case in Latin America and Asia, in business with agricultural
risks and - increasingly - also now in the United States.
In view of its very good positioning in the markets and its financial
strength Hannover Re is a reliable partner for its clients. Thanks to its
excellent ratings ('AA-' from Standard&Poor's and 'A+' from A.M. Best)
the company is able to participate to a disproportionately large extent in
attractive market opportunities.
Hannover Re continues to attach central importance to the issue of risk
management in order to ensure that risks to the reinsured portfolio remain
calculable and that the result is not unduly impacted by exceptional major
losses. A key factor here is diversification, for example with respect to
reinsurance treaties, lines of business and segments.
In the face of a challenging capital market climate, preserving the value
of the assets under own management and maintaining the stability of returns
take on considerable significance. For this reason, Hannover Re aligns its
portfolio according to the principles of a balanced risk/return profile and
broad diversification. Based upon a low-risk investment mix, the invested
assets reflect both the currencies and the durations of the company's
liabilities.
For 2013 the company expects to generate currency-adjusted growth of around
5% overall in its gross premium.
In view of the broadly favourable business prospects in non-life and
life/health reinsurance and given its strategic orientation, Hannover Re
anticipates a pleasing 2013 financial year with Group net income still
expected to be in the order of EUR 800 million. This is conditional on the
burden of major losses not significantly exceeding the expected level of
EUR 625 million for the full year and assumes that there are no unforeseen
downturns on capital markets.
For further information please contact:
Corporate Communications:
Karl Steinle (tel. +49 511 5604-1500,
e-mail: karl.steinle(at)hannover-re.com)
Media Relations:
Gabriele Handrick (tel. +49 511 5604-1502,
e-mail: gabriele.handrick(at)hannover-re.com)
Investor Relations:
Julia Hartmann (tel. +49 511 5604-1529,
e-mail: julia.hartmann(at)hannover-re.com)
Please visit: www.hannover-re.com
Hannover Re, with a gross premium of EUR 13.8 billion, is the third-largest
reinsurer in the world. It transacts all lines of non-life and life and
health reinsurance and is present on all continents with around 2,300
staff. The rating agencies most relevant to the insurance industry have
awarded Hannover Re very strong insurer financial strength ratings
(Standard&Poor's AA- 'Very Strong' and A.M. Best A+ 'Superior').
Please note the disclaimer:
www.hannover-re.com/misc/disclaimer-pr-050811
End of Corporate News
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09.09.2013 Dissemination of a Corporate News, transmitted by DGAP - a
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Language: English
Company: Hannover Rück SE
Karl-Wiechert-Allee 50
30625 Hannover
Germany
Phone: +49-(0)511-5604-1500
Fax: +49-(0)511-5604-1648
E-mail: info(at)hannover-re.com
Internet: www.hannover-re.com
ISIN: DE0008402215
WKN: 840 221
Indices: MDAX
Listed: Regulierter Markt in Frankfurt (Prime Standard), Hannover;
Freiverkehr in Berlin, Düsseldorf, Hamburg, München,
Stuttgart; Terminbörse EUREX
End of News DGAP News-Service
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