Annual Report 2010 - Hannover Re

eversal. Nevertheless, we anticipate further price increases
in the April and July treaty renewals, especially for Australia
in the aftermath of the severe flooding of December 2010 and
January 2011.
The renewals in global treaty business produced a mixed picture.
Although the markets of Central and Eastern Europe
typically saw rate reductions, business there is still profitable.
In Western Europe we scaled back our portfolio in response
to unsatisfactory prices. Market conditions in the Middle East
were very favourable.
The following sections describe the outlook for our major markets
and lines of business.
Target markets
Having cemented our position as one of the leading reinsurers
in our target market of Germany in 2010, we are looking ahead
optimistically to the current financial year. With premium volume
stable overall, prices for loss-impacted programmes rose
while rates declined under programmes that had been spared
losses.
In motor business the primary insurance market bottomed out
in 2010, as a consequence of which premium volume can be
expected to grow by around 3% in motor liability and roughly
5% in motor own damage in the current financial year. This
development, combined with improved conditions, will have
favourable implications for our result in proportional motor
business and also – indirectly – for our non-proportional motor
liability portfolio. In the treaty renewals as at 1 January 2011
we generated rate increases averaging 5% in this line. In industrial
fire business, where the resurgence of business activity
led to an increase in loss events, we reduced our volume.
Lively competition is once again shaping business conditions
in North America in the current financial year.
On the reinsurance side we expect rates for property business
to remain adequate in 2011. Property catastrophe business
saw sharp rate cuts in the treaty renewals as at 1 January
2011, and we therefore scaled back our business in areas
where the price situation failed to adequately reflect the risks.
The picture in casualty business was a mixed one: rates in
standard casualty insurance, an important line for our company,
remained stable; prices in the professional indemnity
lines held stable or fell slightly.
In terms of premium volume, we expect to see a modest increase
(+1%) for the current financial year. Growth will be
driven by Canadian business. Given our very good market position
and the excellent relations that we enjoy with our clients,
we continue to see good business prospects going forward
in our target market of North America.
Specialty lines
We were thoroughly satisfied with the treaty renewals in specialty
lines. Rate movements were particularly favourable in
offshore energy business. In view of the heavy losses associated
with the sinking of the “Deepwater Horizon” drilling rig,
prices here rose sharply in both the property and casualty
lines; we therefore expect to enlarge our premium volume for
2011 by 16%. Rates remained stable in other marine lines
such as cargo and hull covers as well as marine liability.
Thanks to our very good positioning we continue to see attractive
business opportunities in aviation reinsurance. Prices on
the reinsurance market are broadly stable; rate erosion can be
observed in non-proportional business. We successfully expanded
our customer base, especially in emerging markets
such as China and India. For the current financial year we
expect growth of around 12% in our gross premium volume.
Business should also develop well in credit and surety reinsurance.
Although the treaty renewals as at 1 January 2011 saw
price decreases in credit business after above-average rate
rises in the previous years, the development of claims rates
should nevertheless continue to be satisfactory. On the surety
side, too, business is likely to fare well; we do, however, anticipate
a moderate increase in the claims frequency. Given
our selective underwriting policy the premium volume in credit
and surety reinsurance is expected to contract by 8% in
2011. Nevertheless, the premium level is still 50% higher than
at the beginning of the financial market crisis.
Overall, we are seeing sustained demand for contracts with a
greater risk transfer in the area of structured reinsurance
products. Given the likelihood of more exacting capital adequacy
requirements under Solvency II, it is our expectation
that further growth will be possible in Europe. We see potential
for surplus relief contracts in emerging markets, since
here too risk-based capital models are increasingly being
adopted. In 2011 we shall again persevere with our strategy
of enhancing our portfolio’s regional diversification. We are
looking forward to further pleasing development of our business
in the current financial year.
Management report
Hannover Re Group annual report 2010
Forecast Management report
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