Extreme weather events hit Europe again this summer.
(Photo: imago images/Kirchner-Media)
Frankfurt Geopolitical uncertainties, an increase in natural catastrophes and high inflation rates are also affecting the insurance industry. At the meeting of the world’s third largest reinsurer Hannover Re in Monte Carlo, management discussed contract renewals for the coming year with its customers, including the primary insurers Axa and Allianz. Essentially it’s about rising prices.
“We achieved significantly more adequate prices and conditions in the renewal rounds of the current year,” said Hannover Re boss Jean-Jacques Henchoz on Monday: “However, these improvements are not enough in view of the still challenging risk situation.”
Hannover Re board member Sven Althoff, who is responsible for property and casualty reinsurance, described the current market phase as “challenging”. Over the course of the year, the burden of man-made damage increased.
According to Hannover Re, the trend towards more expensive, climate-related catastrophe losses has recently continued. Extreme weather events such as tropical cyclones, heat waves, rainfall and wildfires are increasing in many regions of the world. The high inflation means that the resulting damage costs continue to rise.
The Swiss reinsurer Swiss Re expects an increasing demand for reinsurance protection, as it announced on Monday. Accordingly, the market for non-life reinsurance is likely to grow faster than gross domestic product in the next ten years. On a dollar basis, the market is growing nominally at 5.4 percent each year, adjusted for inflation by around 3 percent.
The world’s third-largest reinsurer anticipates increasing losses from natural catastrophes over the next few years.
(Photo: dpa)
The world’s largest reinsurer Munich Re also said on Sunday that demand for reinsurance protection was expected to increase despite recent price increases.
More and more extreme weather events worldwide
Hannover Re sees different developments worldwide with regard to contract negotiations with primary insurers. Extreme weather events hit Europe again this summer.
While southern Europe suffered from a persistent heat wave, countries such as Slovenia, Austria, Italy and Germany were affected by heavy rain, storms and hail. Hannover Re therefore believes that higher reinsurance prices and tougher conditions are unavoidable.
In Germany, the high inflation rates were particularly noticeable in motor insurance. The division is loss-making for insurers due to increased repair costs and damage frequencies.
In North America, business was affected by several local storm events and the devastating fires in Hawaii, Hannover Re said. The frequency of medium-sized claims, which has been increasing for years, poses a challenge, especially for regionally active insurers.
In the coastal regions in particular, it is also difficult for reinsurers to work profitably. In Florida, Hannover Re will therefore continue to offer reinsurance cover only with restraint.
Climate damage hits China and India
In Latin America, however, Hannover Re expects further growth. The reinsurer is observing that the different regions are recovering at different speeds from the setbacks caused by the pandemic and the natural disasters of recent years.
In Asia, China and India in particular are currently being hit by price increases. Even though the two countries have only recorded a few natural disasters in the last two years, the consequences of climate change are clearly being felt. In New Zealand, the floods and storm damage were reflected in price adjustments, some of which were considerable.
Special business in particular has affected Hannover Re from the war in the Ukraine. Hannover Re expects further price increases in aviation reinsurance, albeit not quite as sharply as in the previous year.
The prices and conditions in the transport business have recently tightened significantly. In addition to the uncertainties brought about by war, the fire on the car freighter “Fremantle Highway” in the North Sea caused extensive damage. Further increases in premiums are likely to result.
More: Where Munich Re sees the greatest risks in the future