Several factors in the reinsurance marketplace point to continued moderate rate increases going forward, Swiss Re and Hannover Re stated as the annual Reinsurance Rendezvous kicked off in Monte Carlo.
Swiss Re states that competing factors are currently in play, pulling the rate environment in different directions. "On the one hand, lower interest rates and higher solvency requirements point to firmer pricing; while low inflation rates, reserve releases and excess capital speak for lower prices," the reinsurer says in a statement.
Swiss Re CEO of Reinsurance Christian Mumenthaler says the factors driving increases will likely win out in the near future: "Upward pressure on prices for reinsurance is likely to rise as low interest rates continue to depress running yields and drag return-on-equity levels down. Significant reserve releases will not go on forever, and solvency rules are tightening all over the world."
Hannover Re, meanwhile, says treaty renewals in the current year have resulted in a "positive outcome" for the reinsurer, as 2011 catastrophe losses led to "significant price increases," particularly for loss-impacted programs.
Speaking to other factors in play this year, Hannover Re says, "The treaty renewals were once again influenced by the low interest-rate level and the associated difficulties in generating sufficient investment income. As a result, the considerable discipline exercised with respect to technical pricing was sustained."
CEO Ulrich Wallin added during a press conference, "We are confident that this trend will continue in the treaty renewals as at [Jan. 1, 2013]."
Hannover Re breaks down its January 2013 outlook into its "three pillars" of non-life reinsurance: Target Markets, Specialty Lines and Global Reinsurance. The reinsurer generally expects stable conditions and positive pricing trends throughout the three pillars, although there are some exceptions. In Target Markets, for example, Hannover Re says the industrial P&C business in Germany is still fiercely competitive, "even though the claims frequency—especially in fire insurance—necessitates a trend reversal."
In Global Reinsurance, Hannover Re says major losses in 2011 made "appreciable price increases" possible in 2012, but the reinsurer says that for global catastrophe business, "it is noticeable that the momentum of the rate increases is slowly flagging, not least owing to a moderate major loss burden in 2012." Still, Hannover Re says it expects prices for natural catastrophes to remain "on a high level" going forward.
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