CEE reinsurance markets: balancing growth, climate risks and tech innovation

“The re/insurance market in Central and Eastern Europe (CEE) is dynamic and highly professional, and the management of the companies involved know what it means to steer the ship in challenging times,” said Klaus-Gregor Hahn, managing director of CEE markets at Deutsche Rück.

Hahn explained how CEE markets were integrated into the global reinsurance network and noted a trend of higher retentions. “We believe that will continue because exposures are growing and companies have become even more sensitive regarding cost of capital versus prices for reinsurance,” he said.  

Hahn is aware of the challenges faced during the last renewal. “Clients steadily increase their retentions, which we support.

“We have to keep in mind that adequate retentions help to stabilise the markets and support clients in their efforts to keep their original business profitable,” he said. 

Despite the trend toward higher retentions, Hahn emphasised that demand for reinsurance remained robust, particularly in catastrophe exposure.

“There is an insurance gap, and we must strive to close it,” he said.

“We have increasing exposures, and we help our clients adapt to these higher retention levels while ensuring profitability.”

Emphasising the need to maintain underwriting discipline, he said: “We must ensure we receive risk-adequate premiums as we face increasing exposures and a changing risk environment.”

As the CEE reinsurance markets continue to evolve, Hahn highlighted the importance of balance. “Maintaining underwriting discipline is crucial to keeping our margins stable and sufficient, as only strong balance sheets ensure we remain a secure partner for our clients,” he concluded. 

Emerging risks and secondary perils

Referring to flooding across parts of Europe, Hahn remarked: “These markets are impacted by special weather patterns which are causing widespread flooding.

“The Baden-Baden reinsurance conference is a great opportunity to discuss cat rates, especially in light of the floods in Austria, the Czech Republic, Poland, and Romania.”

He noted that secondary perils such as floods were becoming more frequent and severe, presenting new challenges for the industry. “They are no longer secondary; they are becoming more significant,” he said.

Hahn discussed how the reinsurance sector was adapting to emerging risks from climate change, stating: “We need to balance environmental and social aspects, as developments in CEE differ from those in Western Europe.”

He highlighted the issue of carbon, and particularly energy supply in countries such as Poland. “The timeline for transitioning to carbon-neutral energy sources in CEE is longer than in Western Europe,” he said. 

“You cannot just switch off coal power plants overnight; it needs more time to finance and construct alternative energy sources.”

Social inflation is not yet a major concern, but he cautioned: “It might come in the future, step by step.”

“There should be more trust in the market economy and its participants.”

Regulatory challenges

Hahn expressed concerns about the rapid pace of new rules. “I feel the European Commission and regulatory bodies want too much at once.

“I would advocate a slower issuance of new regulations,” he said.

He argued for greater trust in market participants, stating: “Not everything needs to be regulated; there should be more trust in the market economy and its participants.”

While regulation is necessary, its overwhelming pace could hinder companies, he said. “They sometimes cannot keep up with regulatory changes and need more professionals, which can be too much.”

Opportunities for growth

Highlighting the significant growth potential in the CEE region, Hahn noted: “The insurance density here is still far from what is a standard in Western European markets, which means there is ample opportunity for growth.

“The economic dynamics in some CEE countries are positive, with higher growth rates than in Western Europe.”

He pointed to the insurance gap as a key opportunity. “There is an insurance gap that can be closed, especially in private lines such as property and casualty, which will naturally lead to growth.

“Small and medium companies show dynamic growth, which is one of Deutsche Rück’s strategic focuses. We see strong potential in supporting this market segment.”

Digitisation and technology

“Digitisation efforts in reinsurance are catching up rapidly in CEE,” Hahn said. “All companies, similar to those in Western European markets, are trying to digitise their core insurance processes, and there’s a lot of potential for making data more valuable using new technologies such as artificial intelligence and blockchain.”

This technological transformation aligns well with the next generation entering the workforce. “Younger colleagues find digitisation easier to apply, as they develop technical solutions with modern technologies in mind,” Hahn explained. 

Klaus-Gregor Hahn is managing director of CEE markets at Deutsche Rück. He can be contacted at: klaus-gregor.hahn@deutscherueck.de