Hannover Re makes first stab at Ukraine war losses at ca 3% of net premiums

Hannover Re wrote precautionary reserves on likely losses from the Ukrainian war at 3% of net premium earned, restricting its loss estimates to lines where losses seem assured but excluding lines such as aviation where uncertainties remain too thick.

“At this stage we do not have sufficient information available to come up with an estimate for an ultimate loss,” CEO Jean-Jacques Henchoz (pictured) said. The initial reserve at 3% of NPE is “more a reflection of exposure in some specialty lines.”

Estimates to date, restricted to key specialty lines with highly likely losses, are based on a rough view to exposure, not incurred losses and “not based on a sophisticated bottom up,” CFO Clemens Jungsthöfel noted.

“We decided to concentrate on those classes of business – political violence, marine, and land war – where we have to assume losses have actually occurred,” P&C chief Sven Althoff added.

Hannover Re additionally sees “quite a few potential exposures” where a reasonable estimate “really depends on the world after the war,” Althoff said. Aviation remains a “very complex situation” at the nexus of coverage, exclusions, cancellations, policy triggers and sanction. For now, “much too early to speculate.”

Hannover Re increased group net earned premiums by nearly 18% year on year in the first quarter to €6.71 billion. In P&C, net earned premium rose 23.8% to €4.78 billion. Officials did not specify the NPE basis of their 3% calculation, but the two sums piont to reserves on the Ukrainian war at €144 million or €200 million. A press statement referred more loosely to “low triple digit million”.

Large losses of €336 million came in €52 million over the quarterly budget and together with reserves on the Ukrainian war took the blame for a rise in the P&C segment combined ratio to 99.5% in Q1.

Beyond the initial reserve, even forecasts on future forecasts remain difficult to predict.

“I’m afraid as long as the war is ongoing, I don’t think the situation will fundamentally change of us saying that it is not possible to form an opinion about potential impact,” an official told the meeting.

“As long as we have this very high level of uncertainty, we may or may not put extra precautionary  measures in,” the individual said, “but it is much too early, and as long as war is an ongoing situation, we will not be in a situation to say what this means for the various lines of business.”

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