Hannover Re sees rates on rise through 2022 renewals, could benefit from increased ‘flight to quality’

Hannover Re expects continued upward pressure on rates at the April and mid-year renewal seasons to benefit the full swath of its business lines and intends to “grow with our clients” across segments, officials said Thursday (March 10).

“We expect all areas and product lines to benefit from the positive environment,” Hannover Re’s chief for P&C, Sven Althoff (pictured), said of rate gains taken in January and expected at the April and mi-year deadlines.

Rate increases in the April renewals will likely slip into a single-digit pace, Althoff said of the pending season.

“We do expect further increases,” Althoff said. “Those will come on the back of two to three renewal seasons already with very significant growth in pricing, so we have to expect a slowdown in those increases, but positive nonetheless.”

Mid-year renewals should see US and perhaps Australian rates continue at their to-date pace, Althoff suggested.

“We do expect further risk adjusted rate increases, also for mid-year renewals,” Althoff said.  “I would be confident for similar rate increases from what we saw last year and I wouldn't expect a slowdown from US wind,” he said.

North American nat cat losses in 2021 will force the pace in that market and, while the scope of ongoing flooding still cannot be measured in Australia, headlines are likely to add pressure. “Pricing is bound to go up on a risk adjusted basis.”

Tightness in the retrocessions market at the January renewals is also likely to make itself felt moving forward, Althoff suspects. “I expect spillover into the reinsurance market.”

Given the advent of war in Europe, Hannover Re could benefit from a flight to quality, CEO Jean-Jacques Henchoz suggested. Geopolitical concerns add a heavy measure of “volatility,” but also of rising demand, he said. “The flight to quality, to better-rated reinsurers … will be even more pronounced in 2022 and beyond.”

Hannover Re will not be looking to alter its portfolio notably during the pending seasons, officials suggested.

“We are not looking at any specific target, but we will continue to grow with our clients; they are also enjoying a positive rate environment on the insurance side, so they offer additional opportunities to grow with them,” Althoff said. “More a constant development within existing client relationships.”

The one area where growth is ruled out is US wind at the mid-year renewals. Over recent years, Hannover Re’s diversification efforts have worked to trim what remains the group’s #1 peril.

“Even if I talk about relatively positive outlook for US renewals later in the Year, it is very unlikely we will see this as an opportunity to further grow our US wind positioned,” Althoff said. “But risk adjusted rate increases are highly welcome to improve the profitability of that business.”

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