Annual Report 2010 - Hannover Re

of demand and the diversification of the markets, our facultative
portfolio should again generate profitable growth in 2011.
We anticipate that the rate erosion in conventional property
and casualty business will be offset by the writing of niche
segments.
Life and health reinsurance
In the coming years, as in the past, we expect to see a positive
basic direction and further dynamic growth in international
life and health reinsurance business; this can be attributed to
the demographic changes in mature markets, progressive urbanisation
and the ongoing formation of a stable middle class
in emerging markets as well as the professional competition
conducted among the six leading life reinsurers. The high entry
barriers and long-term orientation of life and health reinsurance
continue to act as stabilising structural factors in our
markets.
On a global level the growth recorded in life and health reinsurance
should continue to outpace the comparable growth
on primary markets.
In this context we are seeing a shift in demand for new business
away from developed markets such as the United States,
United Kingdom and Germany towards emerging markets
such as China, India, Brazil and Latin America. This trend assists
internationally positioned life insurers and offers this
group of clients – as multinational insurers – considerable opportunities
going forward.
For Hannover Life Re, the evolution of our tried and tested
“Five Pillar” model continues to shape the development of our
business; new markets will remain the principal engines of
growth over the coming two to three years. We also see good
potential in the bancassurance sector, especially in emerging
markets.
Our expansionary efforts are concentrated on the United
States, Arab countries and the key emerging markets of Asia
and Latin America.
With other markets such as South Africa, Australia and Bermuda
also picking up on this model and aspiring to regulatory
equivalence, we see the implementation of Solvency II in
2013 as an essentially global model.
Our business opportunities and risks
Non-life reinsurance
Irrespective of the expectations for individual segments and
markets in non-life reinsurance, it should be noted that the
probabilities of occurrence for (natural) catastrophe events in
terms of their number and scale as well as their magnitude for
the insurance industry are subject to considerable fluctuations.
Hence, the total burden of losses in the current financial
year may be significantly higher or lower than catastrophe loss
assumptions based on multi-year trends and averages.
What is more, in numerous lines there is a correlation between
the state of the overall economy and the claims frequency. A
healthy economic climate naturally leads to higher claims frequencies
– for example in the motor and engineering lines. In
credit and surety reinsurance the correlation is inverted: as
insolvency numbers rise, so do loss ratios – but also prices for
reinsurance covers.
General growth stimuli for non-life reinsurance are expected
to come from the more exacting requirements placed on companies’
risk-based capital resources; for them, the transfer of
risk to reinsurers with good ratings offers an economically
attractive alternative.
Life and health reinsurance
The general framework conditions in international life and
health reinsurance can in principle be described as favourable.
In mature insurance markets such as the United States,
Japan, United Kingdom and Germany this assessment is coloured
by the demographic trend, i.e. the ageing of the population,
which is reflected in heightened demand – especially for
annuity and health insurance products.
Management report
The preparations for Solvency II, and in particular the stress
tests performed by the EU (QIS – Quantitative Impact Studies),
have led to a greater risk awareness among European insurers
and highlighted the important role of reinsurance as a means
of risk and capital optimisation. This is especially true of small
and mid-sized insurers, specialty providers and mutual insurance
companies.
Increasing urbanisation in leading emerging markets such as
China, India and Brazil is fostering a rapidly growing middle
class, which to a greater extent than before is clamouring for
insurance solutions designed to protect surviving dependants
and afford individual retirement provision for policyholders.
With this in mind, primary insurers are looking for tailored
reinsurance solutions that support their own capital, liquidity
Hannover Re Group annual report 2010
Forecast Management report
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