COVID-19 the 'catalyst' for reinsurance rate hikes
Hannover Re’s Sven Althoff says the pandemic has triggered significant repricing in the sector.
By Mark Richardson, London Editor
The reinsurance sector will take a significant step toward true rate adequacy globally in 2021, says Hannover Re Executive Board member Sven Althoff. Althoff tells Reactions that in recent times reinsurers have started to regain some ground on the pricing front, but that progress was initially relatively slow and happened often only in areas directly impacted by losses.
However, in the last 12 months, Hannover Re has already observed much better momentum, and Althoff is now expecting price increases and improved conditions in the upcoming renewals across many segments.
“Given that the industry’s earnings have been below shareholders’ expectation for some time now and coupled with the impact from COVID-19 and the ever more challenging interest rate environment we are optimistic that 2021 will bring the industry a significant step towards true rate adequacy globally with some regional exceptions as the industry overall is still well capitalised,” Althoff says.
Looking towards 1.1 reinsurance renewals, he thinks that COVID-19 will be “the catalyst for significant repricing of reinsurance.”
Nevertheless, he says there are still certain regional dynamics and differences that need to be taken into account.
“After all, there is still sufficient capacity available for coverage but there will be lines of business where it won’t be as easily accessible as in the past,” he adds.
To date the largest losses from COVID-19 on the P&C side are expected to come from business interruption, trade credit and event cancellation, Althoff says, although adds the range of possible scenarios is still too wide for precise forecasts for the full year.
“The measures undertaken by various governments and the duration and intensity of the pandemic will play a defining role in shaping our loss experience,” he says.
He thinks it may be one or two years before the full impact of the coronavirus on the reinsurance industry is known, and that this uncertainty, together with low interest rates, puts even more importance on profitability in technical underwriting.
He says it is in the interest of clients as well as reinsurers to ensure the sector is able to replenish reserves depleted by the pandemic, and other major losses.
“Apart from Covid-19, the devastating explosion in Beirut has been a dire reminder of the threat to lives and property that man-made catastrophes can pose to people beyond natural disasters such as windstorms, wildfires and earthquakes,” he says.
The group is seeing increased demand from clients across many regions and lines of business for coverage, along with increased demand in tailor-made solutions for solvency relief from the area of structured reinsurance.
And despite the unprecedented shift globally to staff working from home this year, Althoff says Hannover Re has managed this challenge well and continued to engage with customers on their changing needs.
“Our underwriters have always been very close to their customers,” he says. “With the international travel ban, they had no choice other than looking for alternatives to stay in touch and keep up the trustful relations. That has really worked much better than expected.”
In future, Althoff thinks virtual meetings will become a more accepted way of doing business compared to pre-pandemic times.
However, he says travelling to personal meetings and events like the Monte Carlo Rendez-Vous will return eventually and continue to form an essential part in maintaining relationships.
“The insurance and reinsurance industry is still a people driven business and those meetings will continue to be an important part in maintaining and strengthening relationships,” he adds.
