Monday, April 15, 2024
HomeGermanyHannover Re’s Germany Unit Expects Further Price Hikes at January Renewals

Hannover Re’s Germany Unit Expects Further Price Hikes at January Renewals

E+S Rückversicherung AG, the Hannover Re subsidiary responsible for the group’s German business, expects further price increases and improved conditions during the Jan. 1, 2024 reinsurance renewals.

Natural disasters and persistently high inflation have again taken a toll on the German insurance industry in the current year. The resulting ongoing rise in reconstruction and repair costs continues to adversely impact the insurance sector’s profitability.

“We must assume that the multi-year trend towards higher claim payments will continue. Adequate prices are indispensable if we are to be able to offer our clients the best possible reinsurance capacity in the future, as we have in the past,” said Dr. Michael Pickel, chief executive officer of E+S Rück, at this year’s reinsurance gathering in Baden-Baden.

The insurance industry around the world increasingly faces the effects of extreme weather, said E+S, noting that in Germany the issue of coverage for the effects of heavy rain, flood, windstorm or hail remains front of mind for both private households and commercial/industrial clients.

Motor Insurance Losses

At the same time, E+S Rück expects motor insurance in Germany – the largest line of property and casualty insurance by volume – to close heavily in the red this year. Furthermore, persistently high inflation is pushing up claims expenditures in property insurance, leading to pressure for further adjustments.

Average claims in motor insurance have again surged significantly in the current year, while at the same time the tariff adjustments made so far have failed to achieve the desired effects.

“Sharply above-average increases in the costs of spare parts and repairs as well as higher claims frequencies are causing massive losses and remain a heavy drag on motor insurers’ profitability,” said Pickel in a statement. “Against this backdrop, we take the view that adjustments to prices in motor insurance are unavoidable in the coming years to move out of the red and restore business to a profitable footing over the long term. We expect to see gradual progress in this respect.”

While losses under natural catastrophe covers were below average in the first six months with summer storms “Lambert” and “Kay,” considerable claims expenditure was incurred in August from a series of storms centred on southern Germany. As a result, 2023 is again expected to see substantial losses overall from catastrophe covers, the company said.

Sustained High Rates of Inflation

Sustained high rates of inflation as well as the trend towards adding natural perils covers to existing contracts will drive claims expenditures for the industry even higher in the future, E+S continued. At the same time, reinsurance capacity remains tight overall, while demand for natural perils coverage is on the rise, E+S said. All of these factors will lead to an increase in prices for catastrophe covers.

In the liability line, discussions among market players likely will be dominated in the year ahead by the issue of inflation as well as by the insurability of risks associated with so-called forever chemicals (PFAS), E+S continued.

After the sharp price increases seen in past years, the capacities offered by existing and new market players for cyber covers should result in price stabilization on a higher level. In view of rising claims expenditures, however, the pressure to make adjustments remains. Controlling and limiting cyber accumulation scenarios have taken on added relevance, as is also evident in contract terms and conditions.

“Despite the challenging market environment, I am confident about the upcoming renewal round, because our customer relationships and thus also the upcoming negotiations are always characterized by a cooperative partnership with all market participants,” said Pickel.

Source : Insurancejournal

RELATED ARTICLES
Continue to the category

TRANSLATE

- Advertisment -

Most Popular