Hannover Re CEO shuns alternative options to navigate soft market

While many of its rival reinsurers are seeking alternative growth opportunities through fee income relating to advisory services, technology or the use of alternative risk-transfer structures, Hannover Re’s chief executive officer Ulrich Wallin believes sufficiently profitable traditional risk transfer business will remain available for the foreseeable future.

“We are currently growing in the US, both in property/casualty as well as in personal liability/casualty reinsurance,” said Wallin (pictured below). “We grow via clients’ demand for new products or through participation in their growth opportunities. This trend continues in 2017.”

In the US, Hannover Re offers reinsurance cover to around 600 primary insurers. North America contributed 35 percent to Hannover Re’s €9.21 billion ($10 billion) property/casualty reinsurance gross written premium in 2016, according to a March 9 annual results presentation. Similarly, the US business made up 30 percent of the company’s €7.15 billion ($7.8 billion) non-life reinsurance gross written premium in 2016.

Meanwhile, Hannover Re’s competitors are testing alternative income sources to improve their financial performances while shrinking the traditional insurance business.

Munich Re, for example, is  investing in IT and data analytics to boost revenues from services, potentially through fee income.

The technology is to be applied by Munich Re in its reinsurance operations to support medium-sized primary insurers which could not shoulder such an investment on their own.

Fee-based income is, however, unlikely to turn into a game changer, according to Wallin. “The profit pool is much smaller than the one generated by the reinsurance risk transfer model,” he said.

“Boosting fee income is not an easy task for reinsurers because they face new competitors and they face a conflict because they also want to do traditional reinsurance business with these primary insurers and it becomes unclear where to charge them for the additional services,” Wallin said.

Similarly, Swiss Re has  high hopes for its tailored transactions operations within property/casualty. Tailored transactions are generally seen as more profitable than the traditional reinsurance business.

But for this business segment, Wallin is also cautious. “Demand does fluctuate and also the type of transactions changes over time,” he noted.

“I see the bulk of our income in the future being generated through risk transfer from primary insurers,” Wallin said.

This a snapshot of a longer article on Intelligent Insurer. If you want to know more about Hannover Re’s business strategy, please click  here.

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