Hannover Re expects price increases for the 1 January 2012 renewals.
“There is a necessity to increase rates on the reinsurance market,” said its CEO, Ulrich Wallin, at the company’s press conference in Monte Carlo. While in the beginning of the year it was about trying to keep rates stable and not to give in to reductions that changed after the Tohoku earthquake, he said.
So in view of the heavy losses incurred by the industry from nat CATs in the first quarter of 2011, Hannover Re expects the widely varying market hardening observed across the board in previous renewal phases to be sustained.
Some brokers have said that they do not expect a hard market given the sufficient capital and capacity available right now. However, Wallin pointed out that the uncertainty in the financial market has an impact on reinsurance as well.
“If you look at the profitability of a reinsurance company, a large part comes from investment income. Reinsurers need to generate combine ratios of below 100. Hence, reinsurance underwriting has also become rather disciplined as a result of prevailing low interest rate.”
On reinsurers competing for market share, he said: “We have not seen any of the reinsurers trying to gain market share by discounting pricing, so that gives us quite a good outlook for 2012 renewals.”