DGAP-News: Hannover Rück SE / Key word(s): Miscellaneous Hannover Re sees continuing trend towards rising prices in property and casualty reinsurance 2021-09-13 / 07:30 The issuer is solely responsible for the content of this announcement.

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Hannover Re sees continuing trend towards rising prices in property and casualty reinsurance . Market climate necessitates further price increases and improvements in conditions for the 2022 renewals . Low interest rate environment, pandemic impacts, inflation expectations and large losses promptdisciplined underwriting approach by insurers and reinsurers . Focus on long-term partnership with clients even in challenging market situations . Sustained demand for coverage from reinsurers with a particularly robust financial base

Hannover, 13 September 2021: Hannover Re anticipates a continuing trend towards higher prices and improved conditions in property and casualty reinsurance for the various rounds of renewals in 2022. Along with the sometimes far above-average large losses recorded in past years, the recent flooding seen in Europe - a natural disaster on a historic scale - and the considerable losses caused by Hurricane Ida have further increased the need for action on the part of reinsurers. Pandemic-related costs and the low interest rate environment are an additional strain on the results generated by primary insurers and reinsurers. Inflation rates have also been rising of late in some regions. This has further heightened risk awareness among primary insurers and given an added boost to demand for high-quality reinsurance protection.

"In property and casualty reinsurance there is a need for further rate increases. Only in this way will reinsurers be able to provide reliable risk protection in an increasingly challenging environment," said Jean-Jacques Henchoz, Chief Executive Officer of Hannover Re. "Particularly where natural catastrophe risks are concerned, adjustments are unavoidable. While the pace of price increases has slowed somewhat of late in the renewals during the year, this was primarily the case in areas where substantial increases had already been recorded in prior years."

In the past rounds of renewals throughout 2021 Hannover Re has already been able to secure improved conditions and higher prices; nevertheless, further adjustments are needed against the backdrop of the multi-layered challenges posed by large losses, pandemic expenditures and the low interest rate level as well as the increasingly intense pressure on margins.

For the treaty renewals as at 1 January 2022 in property and casualty reinsurance Hannover Re expects the positive pricing trend to continue, especially in loss-affected lines and regions. At the same time, conditions are also likely to show further improvement on account of the considerable uncertainties, most notably in relation to future pandemics and cyber attacks.

Profitability in proportional reinsurance is satisfactory in light of sometimes marked price increases in the original market. In non-proportional reinsurance the available capacities continue to be adequate. Rates are holding steady or moving slightly higher worldwide.

Given the uncertainties prevailing on the markets, insurers continue to seek primarily high-quality reinsurance protection. This is where first and foremost reinsurers with a top-notch rating and particularly extensive risk-carrying capacity have a pivotal role to play. Thanks to its business model geared to partnership-based client relationships, its extremely robust capitalisation with a capital adequacy ratio under Solvency II of 250% (as at 30 June 2021) and its excellent ratings ("AA- " from Standard & Poor's and "A+" from A.M. Best), Hannover Re is able to participate disproportionately strongly in the market opportunities that are currently opening up.

"In addition to our customer-centricity focused on long-term partnerships, we offer a broad range of products and tailored solutions that encourage our clients to grow with us worldwide and across multiple lines of business," said Sven Althoff, member of Hannover Re's Executive Board with responsibility for property and casualty reinsurance. "In the current year and beyond this will be reflected in further profitable growth in the gross premium booked in property and casualty reinsurance."

Specifically, Hannover Re anticipates the following developments in the treaty renewals as at 1 January 2022: Europe Natural catastrophe losses have taken a considerable toll on insurance business in Germany in the current year. According to the latest estimates, the disastrous flooding in July caused by the low-pressure weather system "Bernd" alone caused insured market losses of at least EUR 7.5 billion in Germany and the neighbouring countries. Added to this are further hail and severe rainfall events, with the result that even at this stage of the year the heaviest burden of catastrophe losses ever recorded in Germany can already be anticipated. The effects of protective measures taken against the pandemic were particularly evident in the first half of the year in the motor insurance sector as claims frequencies continued to decrease. As the year progressed, however, they climbed back towards pre-pandemic levels. At the same time, a sustained rise in the cost of spare parts and repairs can be observed. Bearing in mind the hail and flood events, results in the motor line are therefore likely to take a significant turn for the worse. Industrial insurance is seeing a rise in major claims compared to the previous year, hence keeping up the pressure for remedial action in this line. In cyber business, progressive digitalisation and continued growth combined with more widespread cyber attacks are prompting greater risk awareness and adjustments in conditions. There is a need to clarify the handling of silent cyber risks as well as accumulation scenarios, which can be insured only to a limited extent. All in all, against the backdrop of heavy claims expenditures, Hannover Re expects to see appreciable adjustments to conditions for property business in Germany, especially for catastrophe covers.

Further rate increases can be seen on the primary insurance market in the United Kingdom and Ireland, although on the whole they are not as marked as in prior years and vary according to the line of business. Rate increases and improved conditions are especially evident in the market for liability covers. Additionally, the international cyber market is posting significant rate increases that will have a positive effect on the proportional portfolio. This development is driven largely by the rise in the frequency and amount of ransomware losses. The international property business written by Lloyd's syndicates has already hardened in recent years owing to worldwide natural catastrophe losses. This trend is set to continue in slightly more muted form. In UK motor business, which Hannover Re writes solely on a non-proportional basis in traditional business, the past few years have already seen substantial price increases; for the upcoming renewals a stable environment is therefore anticipated.

In France the price increases seen on the primary side are expected to slow somewhat. Among other things, this is due to the lockdown-related improvement in the claims frequency in motor business and the uncertainty surrounding the strength of the economic recovery. Declining income booked from investments continues to have a stabilising effect on prices, as does the sustained burden of loss expenditures - including from natural perils. Overall, this should also have a positive effect on movements in reinsurance prices.

In the markets of Central and Eastern Europe Hannover Re expects growth rates in primary insurance business to pick up over the medium to long term. Price increases are necessary in this region for loss-affected treaties and in natural catastrophe business.

North America The primary insurance market in North America continues to see rate increases in virtually all lines. Furthermore, the impacts of Covid-19 appear to have affected the economic climate less severely than initially anticipated. Despite the improved state of motor insurance business, the level of claims expenditure nevertheless remains precarious overall due to the unusually early start to wildfire and hurricane season. Further improvements in conditions and rates are again likely for the year ahead in response to this growing threat and the resulting increase in the claims burden. In view of the continuing economic recovery combined with the challenges presented by the pandemic, rising inflation and a steadily growing potential for losses from various lines, further rate increases and clarifications in the scope of coverage are essential. The focus here continues to be on the capital resources of reinsurers, thereby further strengthening Hannover Re's position in this market.

Latin America The current challenges facing primary insurers due to the growing exposure to natural catastrophes and social unrest further reinforce the need for robust and well-structured reinsurance solutions. The latest rounds of renewals once again showed the increased demand among cedants and brokers for individual concepts and solutions. This growth trend should be sustained across multiple countries, albeit on a varying level. As an additional consideration, the exposure deriving from social unrest must be factored more heavily into the pricing. Hannover Re's engagement in cooperation with Global Communities and the United Nations Development Programme (UNDP) is driving lively interest in the development of coverage concepts for local communities and regions, especially in Argentina and Colombia. Asia-Pacific The Asia-Pacific region is evolving into one of the largest global insurance markets. This growth holds the promise of further significant business opportunities, in part because the insurance density here is still lower than in

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September 13, 2021 01:30 ET (05:30 GMT)