Hannover Re likes growth in 2023, eyes nat cat and steady fac flow

Global reinsurer Hannover Re will pursue growth, including in nat cat lines, at the pending 2023 reinsurance renewals and by sweeping up lingering demand via its facultative and structured solutions, top officials have claimed.

“We will continue to seek material top line growth,” CEO Jean-Jacques Henchoz told a conference call with equity market analysts. “Some will come in the upcoming renewals in April, June and July, but also from some lines of business, in particular our single risk and fac, but also structured.”

Growth plans include nat cat treaty, available aplenty in the April, June and July treaty renewal deadlines, board member and P&C reinsurance leader Sven Althoff added.

“We have not fully utilised the capacities we have available for the full-year 2023, so we will have the flexibility to look at attractive alternatives or additional business for the 1st April, 1st June and 1st July renewals,” Althoff said.

Hannover’s cat business “will ultimately increase for the course of 2023,” Althoff said.

Comments follow word that Hannover Re had leveraged the hard market pricing and conditions to do some “portfolio steering” at the 1.1 renewals. Total premium was down 0.7% year on year after Hannover Re walked away from some 14% of premium up for renewal. Hannover Re made a massive shift from proportional into excess of loss and trimmed loss makers, heavily so in APAC where premium was down 21.6% on inadequate primary insurance pricing.

The driver remains profit, not volume, and Hannover Re is “under no pressure to write cat,” Althoff said. “We have increased profitability requirements due to the inflationary environment and due to the fact we are updating our model,” Althoff said.

But expectations are that strong pricing and terms can be found after the 30% average gain in risk adjusted pricing at 1.1.

“For the April and mid-year renewals in Japan, Australian and North America, we expect continued strong momentum of reinsurance pricing,” Althoff said. “We will be able to take advantage of the positive trading environment throughout 2023.”

What Hannover Re doesn’t pick up at treaty renewal, will be available for the picking in facultative deals year-long, officials believe. Premium volume growth in facultative should top 10% for 2023 with limited added catastrophe exposure which Hannover Re does chiefly via treaty.

“For the remainder of the year, we expect strong demand,” Althoff said, noting the “momentum for fac pricing is good, in many cases stronger than the underlying insurance.”

In nat cat, Hannover Re has increased capacity thanks to having increased retrocession without having cut its appetite for net exposure. “Our overall risk appetite remains relatively unchanged.”

The additional nat cat retro had been brought on board on account of above-expectation portfolio growth in 2022, the impact of interim currency moves and the desire to “create room to manoeuvre and to help our ceding companies with their additional demand.” Underlying nat cat net risk appetite was “slightly increased.”

More nat cat need not mean higher allocation to US nat cat perils where the view “has not significantly changed,” Althoff said. “We are still not prepared to outgrow on the US natural perils side compared with other territories.”

The preference for excess of loss over inflation-stricken proportional covers may continue, but need not be as pronounced as at 1.1 which is overall more weighted to quota share than other renewal periods. “If our assumption that the pricing momentum continues to be strong on non-proportional, we may continue to shift,” Althoff said.

At the 1.1, Hannover Re chased its preference with 21.4% growth in its non-proportional book alongside a risk-adjusted price increase of 20.7%. Proportional treaties contracted by 8.7% to €6.64 billion and delivered a 3.4% risk adjusted price increase.

Asked if the distaste for proportional allow for the type of non-renewals rates Hannover Re posted in January, Althoff nonetheless said only it remains “too early to say.”

Casualty lines came through the renewals “more stable” than property or specialty. Going forward, cedents will be watched closely for how they react to rate and claims development, especially in professional lines. Hannover Re is “mindful of underlying rate developments in some of the professional lines” and how cedents run cycle management, Althoff said.

Cyber was a growth segment at 1.1 and in the year to come, Althoff indicated. “The momentum continues to be positive,” he said of his group’s move past the €600 million mark. The group has gained “additional flexibility” with a new proportional retrocession placement.

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