Big four reinsurers show 'substantially different' take on renewals

As discussions around the year-end renewals gather pace, a new report by  Litmus Analysis has revealed some interesting and informative insights on the "substantially different" approaches of  Hannover Re,  Munich Re,  SCOR and  Swiss Re - the four major European reinsurance groups - which could be beneficial for buyers as they open negotiations.

The firm conducted a comprehensive evaluation of the mid-year renewal disclosures of Hannover Re, Munich Re, SCOR and Swiss Re, describing it as "a negotiation dominated by business from North America and Asia Pacific".

Litmus stated that all of the big four European reinsurance groups grew their books of property & casualty business at the recent mid-year renewals – but substantial differences emerged in the extent to which they achieved rate increases, something that could be an important indicator for the year-end renewals.

In aggregate, the four companies renewed some €12 billion of treaty premium, with growth of 11 percent and an average risk-adjusted price increase of 2.1 percent, compared with the growth of 5 percent and an average price increase of 4.9 percent achieved at mid-year 2020.

However, the report highlighted some key differences between the four. Hannover Re led the way in terms of overall growth, adding 15 percent in renewed premiums – almost double the 8 percent achieved by SCOR.

But when it came to price increases, SCOR led the way by achieving almost 8 percent. In contrast, Swiss Re saw average rate changes of an estimated 0.7 percent. Litmus noted that over the last six quarters SCOR also led the way with an average quarterly increase of 6.3 percent, though Swiss Re jumped to second at 5 percent, with Hannover Re at 4.3 percent and Munich Re at just 2.3 percent.

The report also revealed that, for the most part, premium rate increases appeared to have slowed at mid-year 2021, compared with those reported at 1 January 2021, the exception being SCOR whose average price increase was bigger than that at 1 January.

Lewis Phillips, senior consultant at Litmus, said: “This report highlights some key differences across the four major reinsurance groups at the recent renewal – and this could have implications for the way they approach negotiations as we move towards the much bigger year-end renewal. Some groups are clearly pushing for price increases – and succeeding – while others may be taking a more nuanced approach. Buyers may find the detail here interesting and informative as they open negotiations.”

Stuart Shipperlee, head of analysis at Litmus, added: “It’s interesting that both Munich Re and SCOR made a point of stressing that buyers are looking for high levels of financial strength backing long-term relationships. With their very high ratings they might be expected to say that, and the pricing increases achieved don’t necessarily prove the point. Nonetheless it is not difficult to see how the last 18 months will have further heightened cedents' focus on reinsurer financial strength ratings and their likely resilience to severe stress.”

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