Retentions still holding, current P&C market sentiment to persist: Althoff, Hannover Re

Sven Althoff, Member of the Executive Board for P&C at Hannover Re, said today that the global reinsurer is not expecting a change in P&C market sentiment despite another active period for catastrophe losses, notably from secondary perils.

This morning, reinsurer Hannover Re announced a very strong set of results for the first half of 2024, including P&C revenue growth of 9% to €9.1 billion, despite expenditure for large losses hitting €588 million, driven by flooding around the world and civil unrest in New Caledonia.

According to industry estimates, natural catastrophe losses again exceeded $60 billion in the first half of this year, with secondary perils, notably severe convective storms and flooding, contributing heavily.

While insured losses from natural disasters continued to be elevated through the first half of 2024, reinsurers worked to secure tighter terms and conditions throughout 2023, and the now higher attachment points means that primary insurers are retaining a greater share of losses than in the past, particularly when they come from frequency type events.

It’s clear from market commentary through Q2 and H1 2024 reporting that reinsurers have maintained discipline, which combined with the still favourable pricing environment, has resulted in strong P&C earnings for many.

In light of this, Hannover Re executives were questioned during a recently held analyst call on market sentiment, and whether there might be any changes in the space amid persistently high losses from secondary perils.

Althoff confirmed that Hannover Re is “not expecting a change in sentiment when it comes to technical price adequacy.”

“When you look at the main macro drivers, we are still in a challenging geopolitical environment, inflation, social inflation are still very meaningful topics, and you mentioned climate change in particular,” he continued.

Althoff went on to note that reflecting on the mid-year renewals, during which Hannover Re’s renewed volume grew by 11.5% with an inflation and risk-adjusted price increase of 1.3%, it was clear that there was sufficient supply to cater for the increase in demand.

“And, in certain places, we have also seen a slight softening of terms and conditions, but this very much was at the upper end, the severity end of programmes. The result of the market was very strong when it comes to retention levels, and also pricing in the lower part of programmes, which of course, is where most of the losses related to climate change have materialised over the last three, four years,” said Althoff.

Regarding terms and conditions, Althoff confirmed that these are still holding.

Looking ahead, the consensus appears to be that reinsurers will remain disciplined through the rest of the year and into 2025, with firms eager to make the most of the current market conditions in order to make up for the challenges of the past.

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