Less available capacity favours ‘true partners’: Hannover Re

In a renewal where less available capacity is meeting higher demand, Hannover Re will offer its “true partners” a more favourable approach when deciding where to put its capacity, Ralph Weyand (pictured), managing director at Hannover Re’s Malaysian Branch, told Intelligent Insurer.

Weyand, who has responsibility for the Asia-Pacific region with the exception of Australia, New Zealand and greater China, said that while he had seen hardening in other markets such as Europe and the US in the past 12 to 18 months, the hardening had been “much less” in Asia-Pacific, adding that in terms of business it was “so far so good”.

However, he added: “We do have the usual suspects with regard to natural catastrophes. We just saw another big typhoon hitting the Philippines, so weather-related nat cat remains challenging and puts pressure on rates and on results.”

Apart from nat cat, Weyand said, economies in the region are recovering from COVID-19. “We see the same reactions here as in other markets. Personal lines business is more or less getting back on its feet again, and loss ratios on motor are high again as they were before the pandemic, so it’s normalising.”

Market normalising is a positive trend, he said, in the sense that for the last one or two decades rates have been too low. However, at the same time some basic and fundamental changes need to be implemented in most of the markets, he said.

“All markets in the region, with maybe the exception of Japan which is still quite different, have to react and will see the pressure from the reinsurance market in the coming renewal.”

Asked if this meant insurers would need to increase their retentions, he said that this could be one result.

“Reinsurers might not necessarily ask for higher retentions, but they would ask for the technically right margins,” he said. “And the margin requirements on the reinsurers’ side have increased.”

Weyand added that all reinsurers lost some capital or equity this year. “What we see is less capital, less capacity available meeting a higher demand.

“The only answer to this issue is that prices and terms need to be more attractive, otherwise reinsurers will have to ask themselves where to put their capacity.”

For Hannover Re, Weyand said: “We will put our capacity individually to those clients that have been very close to us over a decade, or more.

“It boils down to the question of whether these are our preferred clients? Were they looking at this as a true partnership, which is a two-sided story, or are they mainly going to the cheapest market?

“They might continue this but then they might face the consequences of our, maybe, withdrawing capacity if we feel the rates are not right and we don’t feel this is a true partnership,” he concluded.