Hannover Re CEO Jean-Jacques Henchoz said that the July reinsurance renewals set a baseline for rate expectations in the January 2021 renewals, and that he expected growing momentum to result in outcomes surpassing the levels recorded in July.
Hannover Re calculated the rate change on its mid-year renewal book at 5%, with non-proportional business up almost 10%.
Reinsurance rates initially gained momentum after years of soft-market declines as a result of the nat cat loss burden the industry had taken in 2017-19, he noted.
One major talking point for the industry in the run-up to 1 January is whether Covid-19 losses are still likely to reach the scale initially feared and become one of the most expensive insured losses on record.
But Henchoz said he remained confident on Hannover Re's own loss estimate for the pandemic, although the ultimate outcome "could go either way".
"There might be a little bit of development depending on what happens in the UK, but our sense is that we're pretty close to what should be an ultimate loss."
Besides BI exposure, credit and surety losses remain another area of major uncertainty given the poor shape of the global economy.
Hannover Re reserved for EUR600mn ($709.5mn) of Covid P&C losses in the first half of 2020.
The firm is known for running a notably low expense ratio – 2.4% in its administrative expense ratio versus 5.5% for a five-strong peer group in 2019. Questioned on how the company achieved this, Henchoz said that being cost-aware was "part of the DNA of the company".
"We're not delivering a lot of services unrelated to business we want to pursue – we work with our clients in a very focused fashion," he explained. The carrier's real estate footprint is also helped by being outside high-cost locations.
But double-digit growth in its P&C business has also helped the cost ratio even as Hannover Re makes material new investments every year, the CEO added.
Meanwhile, the global nature of the (re)insurance industry means that carriers need to remain prominent advocates for open economies at a time when trade barriers are increasing, Henchoz argued.
"It's important that we as an industry carry the flag to raise the awareness for the need for free flow of capital and human resources so we can help rebuild when there is a big catastrophe."
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