Hannover Re execs predict firm pricing at renewal

MONTE CARLO, Monaco—Reinsurance companies are looking forward to a firm renewal at year-end, a reinsurance executive says.

"Generally trading conditions in the property/casualty reinsurance market continue to be risk-adequate and therefore attractive," said Wilhelm Zeller, chairman of the executive board at Hannover Re in Hannover, Germany.

"Capacity is available in most lines at reasonable prices, except for catastrophe prone property business in the USA. Most reinsures reduced their peak exposures in this segment, yet show unchanged or even increased premium levels. 2006 renewals have shown substantial rate increases in loss affected programmes, already from a high level, of up to more than 100%," said Mr. Zeller during the Rendez-Vous de Septembre in Monte Carlo.

Hannover Re believes that increases at the coming renewal will be greater than at the last because of the major losses over the last two years and the subsequent changes to catastrophe and capital models. The company expects to see a further reduction of "acceptable" capacity in security sensitive areas of business because of rating downgrades. A softening will only be seen in a few lines such as aviation, according to the German company.

In the company's home German market, Michael Pickel, a member of the executive board Hannover Re, said that he expects declining rates in the primary property business but added that major losses will be reflected in "adjusted reinsurance terms."

Casualty business will remain firm because of a "flight to quality" said Mr. Pickel. Low loss frequency in motor will lead to lower rates at the primary level in motor but non-proportional rates in motor liability will rise because of the development of bodily injury claims and medical inflation, he added.

Ulrich Wallin, a member of the reinsurer's executive board, said that he forecasts a further softening in primary airline business probably because of new entrants in this line. Non-proportional reinsurance rates will be stable or slightly reduce, he predicted.

Mr. Wallin said that for London market business he predicts continued pressure on worldwide exposed property business with a further reduction in available capacity and increased rates. Other property business will be stable while non-proportional casualty business will see stable to slightly softening conditions, he added.