Hannover Re broadly satisfied with January 1 treaty renewals

Hannover Re has announced it is broadly satisfied with the outcome of January 1 treaty renewals, noting that despite the challenging business environment, its assumption is that the underwriting result for 2015 should again be in the region of the 2014 figure, provided major losses remain within the expected range.

“The price decline in many markets was significant compared to the previous year,” Ulrich Wallin, CEO of Hannover Re, says in a statement, adding that German and United States business held up especially well this renewal season.

“Thanks to our good rating and long-standing customer relationships, we, nevertheless, achieved a rather pleasing outcome. Despite our systematic selective underwriting policy, we were able to keep our portfolio stable,” Wallin notes in a statement Wednesday.

Despite softer market conditions overall in property and casualty reinsurance, Hannover Re reports that its good positioning and high quality of loss reserves should help the company – depending on the burden of major losses in p&c reinsurance – “be able to generate good underwriting results again in 2015, even though the rate quality in the reinsurance market has deteriorated appreciably.”

The reinsurer expects to generate a stable or slightly higher gross premium volume in the 2015 financial year based on constant exchange rates, the statement notes. “As usual, all statements are subject to the proviso that major loss expenditure does not exceed the anticipated level of EUR 690 million and that there are no unforeseen adverse movements on capital markets.”

Hannover Re reports that the “treaty renewals were particularly notable for a clear trend towards increased retentions carried by ceding companies.”

In addition, the inflow of capital from alternative markets (ILS) continued to put prices under additional pressure, above all in natural catastrophe business.

“This led to rate reductions in many areas and, in some cases, deteriorations in conditions. It was, however, possible to push through rate increases under programs that had suffered losses in 2014,” the statement adds.

With regard to target markets, Hannover Re reports that treaty renewals in North American business passed off satisfactorily. “Whereas heavier pressure on rates could be felt in general liability, the professional indemnity lines proved more robust. Slight rate increases were recorded in Canada owing to the losses incurred in 2013 and 2014,” the company adds.

All in all, the rate level in the U.S. continued to be commensurate with the risks, enabling Hannover Re – in part also through targeted new business acquisition – to grow the premium volume in North America by altogether 5%.

With regard to the Global reinsurance segment, Hannover Re notes the picture is a mixed one:

• the company is satisfied with its treaty renewals in Latin America, though the main round of renewals will not take place until July 1, 2015;

• the growth potential for agricultural covers remains considerable, above all in emerging markets; and

• natural catastrophe business developments varied, with the U.S. property catastrophe business seeing the anticipated declining rates, but improvements of 5% to 10% in Germany under loss-impacted programs.