MONTE CARLO—Insurers squeezed for capital during the financial crisis are stirring demand for reinsurance, which will push up the cost of coverage in some classes, Hannover Reinsurance Co.’s top executive says.
Ulrich Wallin, chief executive officer of Hannover Re, said during a presentation Sept. 7 at the Rendez-Vous de Septembre reinsurance meeting in Monte Carlo that reinsurance prices are rising in capital-intensive classes as buyers recognize the value of the coverage during the financial downturn. Those classes include credit, surety and aviation.
Other areas of the reinsurance market also may see hardening rates, said Mr. Wallin. Among them, casualty lines in the United States remain soft and need meaningful rate increases, he said.
“As far as property catastrophe business is concerned, while in general we saw a hardening in 2009 in that market, the acceleration (of pricing) throughout the year, which some observers had hoped for, did not take place,” said Mr. Wallin. “The reason for that is largely that there was sufficient capacity available, so the pricing trends that started at the beginning of the year pretty much prevailed throughout the entire year.” Hannover Re’s position is that property catastrophe rates, absent a major event or further turmoil in the capital markets, will remain stable.
Overall, Mr. Wallin said Hannover Re expects “stable to increasing” reinsurance rates in the coming year. “We think 2010 for the reinsurance market as a whole could be a relatively good year.”
In Germany, where Hannover Re concentrates on accounts that are smaller, such as mutual insurers, “we have seen in the property industrial business that rate reductions have slowed down,” said Michael Pickel, a member of Hannover Re’s executive board.
He noted, though, that clients tend “not to purchase the same amount of insurance as before in order to keep the pricing at the same level.”
On the casualty side in Germany, Hannover Re is seeing competition continue apace among direct insurers, said Mr. Pickel. “Terms and conditions are still sufficient,” he said of reinsurance for those clients, adding that “we see a flight to quality” among buyers looking for financially stable reinsurers.
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