Hannover Re, Germany’s second- biggest reinsurer, said reinsurance premium rates may fall by between 2 percent and 5 percent in January’s contract renewals as competition drives down prices.
“On average, the capital is sufficiently available in most markets in the world so in the absence of significant losses you will have fading renewal prices,” Juergen Graeber, a management board member at the reinsurer, told reporters today in Monte Carlo, where companies and brokers are meeting to begin talks over renewals at the start of 2011. The forecast excludes some loss-making markets such as Chile, Graeber said.
Record insurance losses in the first half have failed to spur premium rate increases across all lines of insurance, according to Fitch Ratings Ltd. U.S. property and casualty rates this year fell to their lowest in 10 years, according to the Council of Insurance Agents and Brokers, as last year’s rebound in equity and bond markets rebuilt insurers’ balance sheets.
“There are opportunities for us to grow, despite the softening market situation,” Chief Executive Officer Ulrich Wallin said at the conference, citing agricultural insurance, emerging markets and insurance-linked securities. “We will see expansion of the nonlife business in 2011.”
The reinsurer said last month that net income should reach 600 million euros ($772 million) at the end of the year if second-half catastrophe claims don’t exceed 280 million euros. That target is unchanged, Wallin said today.
Hannover Re was forced to more than double its estimated losses from the Deepwater Horizon explosion and oil spill in the Gulf of Mexico to 89 million euros, as claims for the first half of the year reached 408 million euros.
“This is the biggest ever liability loss,” Graeber said. “For years and years we will not know how the losses of this event will be distributed.”
Hannover Re also said it supports German rival Munich Re’s plan to offer as much as $20 billion of liability cover for individual oil drilling projects in the Gulf of Mexico. The plan would need government support to be successful, Graeber said.
“There must be a regulatory framework and in an ideal world a compulsory scheme,” he said. “This would generate an appropriate premium pool.”
This month’s earthquake in New Zealand may cost the insurance industry about $4 billion, Hannover Re said. “This is a severe claim” for the region, management board member Andre Arrago said. “It will have an effect” on premiums, he said.
Hannover Re’s loss from the earthquake won’t be a “three- digit million-euro figure,” Wallin said.
The shares rose 35 cents, or 1 percent, to 35.71 euros in Frankfurt, bringing this year’s gain to 9.2 percent.