Hannover Re said during the latest reinsurance renewal season, premium rates have remained strong and in a few sectors have soared with up to 200 percent increases for marine business.
The Hannover, Germany-based reinsurer said it expects its return on equity this year should be at least 15 percent
Premium rates, Hannover Re said, have been stable despite reduced risks, although rates have jumped by 100 percent and more in hurricane-exposed regions.
Although the company scaled back its writing of risks in particularly loss-prone segments–notably by as much as 22 percent for U.S. windstorm business–gross premium income for the entire property and casualty reinsurance portfolio remained stable due to the rate increases, the company noted.
Hannover Re said 32 percent of its business comes from the U.S. property-casualty sector.
Out of a total premium volume of $4 billion Euros [$4.8 billion] in property and casualty reinsurance in the 2005 underwriting year, treaties worth altogether 2.7 billion Euros [$3.2 billion] (67 percent) were due for renewal on Jan.1.
Hannover said a volume of 2.4 billion Euros [$2.8 billion] (59 percent) was renewed, whereas treaties worth 318 million Euros [$381 million] (8 percent) were either canceled or renewed in modified form.
Including additions of 278 million Euros [$333 million] (7 percent) from new and modified treaties as well as rate improvements, the new premium volume thus amounted to 2.6 billion Euros [$3.1billion] and gross premium income for the property and casualty reinsurance business group remained virtually unchanged at 4 billion Euros [$4.7 billion], the company said
Hannover said last year's huge hurricane season losses were the primary factor in preserving a favorable market climate for reinsurers in the United States. Rate increases averaging around 50 percent, but sometimes in excess of 100 percent, were obtained.
Hannover said its positive trend was helped further by updated accumulation control and by pricing calculations revised in light of the experience with Hurricane Katrina.
"By adjusting our accumulation and pricing models and reducing peak risks, we have done our homework in the aftermath of the storms and made optimal use of the market opportunities that presented themselves. Our portfolio is now considerably more weatherproof and superbly poised for the challenges ahead in the current year," Chief Executive Officer Wilhelm Zeller noted.
Looking ahead at the possible outcome for this year, Hannover said advantageous conditions in the property-casualty reinsurance market are likely to improve still further in the upcoming renewal phases on the first of April, June, July and October.
Mr. Zeller said, "The adjustment of our pricing models was not restricted to windstorm aggregates in the U.S.A., but extended to other areas of peak exposure in our portfolio – such as earthquake covers."
He added that, competitors who have not as yet built the new loadings into their quotations will have to follow suit in the course of the year, a move that should cause prices for catastrophe covers to rise across the board.
"In view of the rating agencies' more exacting capital adequacy requirements–which also have to be incorporated into the pricing calculations–and the risks that have to be remodeled across a broad front, we expect increasing demand to go hand-in-hand with shrinking supply," Mr. Zeller emphasized.
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