Hannover Re Sees Risk-Adequate Nat Cat Pricing, Capacity
Reinsurer Hannover Re states natural catastrophe risk pricing remains technically adequate but expects softening in 2027.
Global reinsurer Hannover Re says pricing for natural catastrophe risks remains technically adequate. The firm anticipates prices will likely continue to soften at the key January 2027 renewal season.
Speaking at the Monte Carlo Rendez-vous, the company described an increasingly challenging market environment in property and casualty reinsurance. It noted slightly lower prices but said the quality of business, along with terms and conditions and client retentions, remains good. Hannover Re stated that selective growth at risk-adequate prices is still achievable.
Chief Executive Officer Clemens Jungsthöfel outlined the pressures. "Growing uncertainties combined with intensifying competition are causing increasing headwinds for the reinsurance industry," he explained. He cited geopolitical tensions, inflation, digital threats, and climate-related risks as factors making long-term claim cost evaluation difficult.
High-quality reinsurance capacity remains in demand, according to the firm. However, the supply of capital in the sector keeps increasing. This leads to higher competition and price pressure in property catastrophe reinsurance, though terms and conditions are largely stable.
Market Outlook for 2027 Renewals
For the January 2027 renewals, Hannover Re anticipates largely risk-adequate pricing across property and casualty reinsurance. The company expects slightly lower prices with terms and conditions likely remaining broadly unchanged. Hannover Re plans to make at least stable reinsurance capacities available, provided risk-adequate prices can be obtained.
Sven Althoff, an Executive Board member for property and casualty reinsurance, detailed the strategy. "We grow where prices are commensurate with the risks and relinquish business that does not meet our profitability requirements," he said. He noted growth opportunities are expected in regions with increasing insurance penetration and economic growth, as well as in markets where the company expands its shares selectively.
Regional Natural Catastrophe Market Trends
Hannover Re provided a breakdown of major global natural catastrophe markets. The firm said prices in North America have softened in recent renewals but are still technically risk-adequate. Future market developments will be crucially shaped by claims activity, especially from weather-related perils like severe storms, tornadoes, hail, and heavy rain events.
In Europe, following significant adjustments effective January 1, Hannover Re expects the price trend to normalize and stabilize if no sizeable loss events occur. Terms and conditions for retentions and coverage scope will likely remain broadly unchanged.
Losses in the Asia-Pacific region remained below long-term expectations overall. This has led to more marked price reductions, especially in Japan, Australia, and New Zealand. Given the corrections that have already happened, Hannover Re now sees a need for pricing stabilization in the region.
Capacity and Future Conditions
Demand for reinsurance covering natural catastrophe risks remains solid and is expected to keep growing. Pricing is still viewed as technically risk-adequate. At the 2027 renewals, Hannover Re expects moderate price movements that will depend primarily on claims experience and regional market circumstances.
The company emphasized that risk-adequate prices and terms are key given the considerable volatility of natural catastrophe business. Hannover Re sees attractive opportunities in the current landscape. The firm stated it is prepared to make additional capacity available if market price levels remain acceptable.
