frankfurt The many big losses this year are likely to see reinsurers’ premiums rise significantly next year as well. Jean-Jacques Henchoz, chief executive of Hannover Re, expects prices to rise as soon as the next major treaty renewal with primary insurers such as Allianz or Axa occurs in January, especially in areas that have recently been particularly hard hit. “This is the only way reinsurers can offer reliable risk protection in an increasingly challenging environment,” he said at a virtual news conference on Monday. The most important meeting of the industry, which usually takes place in Monte Carlo at this time, will also be canceled this year due to the pandemic.
The two competitors, Munich Re and Swiss Re, had already announced an increase in premium income in recent days. In addition to the costs of the pandemic, the effects of natural disasters such as Hurricane “Ida” in the US recently or Storm “Bernd” in July generate high costs.
It’s still too early to make an accurate forecast for Hurricane Ida, which also inundated parts of New York, said Hannover Re board member Sven Althoff. between 15 and 30 billion dollars. At least some of this is likely to be attributed to Hannover Re being number three in the industry.
Major losses are within the forecast range
More specific figures, on the other hand, are already available for the financial effects of the severe flooding caused by storm “Bernd” in July in Rhineland-Palatinate and North Rhine-Westphalia. Here, the Hannover Re management expects losses of 200 to 250 million euros, which the group will probably have to pay.
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According to Hannover Re estimates, the total damage caused by the flood disaster in Germany and neighboring countries will cost the insurance industry at least 7.5 billion euros. The industry association GDV had recently spoken of the most expensive natural disaster year in history in Germany and identified insured storm damage totaling €11.5 billion on houses, household items, businesses and motor vehicles.
The discrepancy between insured losses and reinsurers’ income is due to the fact that primary insurers always only cover a part of their claims portfolio with reinsurers.
Even after the natural catastrophes in the third quarter, Hannover Re’s large loss total remains in line with expectations for the year as a whole. In the first half of the year there were charges for 326 million euros. According to previous information, the annual budget for possible expenses was 1.1 billion euros. Consequently, they are confident in Hannover that they will achieve the target profit margin of €1.15bn to €1.25bn this year.
In general, there is a trend on the client side towards financially strong reinsurers, which mainly include the big four traditional companies from Munich, Zurich and Hannover, as well as the French company Scor. Just a few years ago, alternative providers like hedge funds tried to get into the business. However, after some hefty claim payments, several of them quickly withdrew.
Management’s outlook gave shares of Hannover Re a 1.5 percent boost. For the first time since the outbreak of the pandemic a year and a half ago, the price rose above 160 euros again.
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