Global reinsurance
Overall, we see very good opportunities in the global reinsurance segment, both in retakaful business – i.e. reinsurance transacted in accordance with Islamic law – and in facultative reinsurance. The markets of Central and Eastern Europe also promise to develop very favourably.
In Western and Southern Europe rates held stable for longtail business, while softening slightly for short-tail business. We expect builders' risk covers in France – an area where we are the market leader – to offer further good business opportunities. Rates here were largely unchanged.
The development of markets in Central and Eastern Europe, which are a strategic focus for our company, is similarly positive. Demand here for reinsurance products is rising, and we therefore expect our premium income to continue growing on the back of unchanged healthy profitability.
Increased competition is making itself felt in Latin American markets, as it is in Brazil too. We are nevertheless looking to boost our premium volume here slightly.
Contrary to expectations, prices in original business did not increase in China. Despite this, we were able to push through reduced commissions in some instances. We expect our premium volume to grow slightly in the current financial year. In this respect, our new branch in Shanghai offers the optimal platform for further expanding our position in China. In other Southeast Asian markets such as Malaysia we are looking to generate moderate premium growth. In the Japanese market – where treaties are for the most part renewed on 1 April – the premium volume should remain stable.
In 2010 we can look back on our Australian branch's 25 years of successful development. Rising prices in non-proportional business combined with opportunities arising out of the reinsurance of new agency business will likely generate further premium growth.
As expected, rates in worldwide catastrophe business came under pressure in the treaty renewals as at 1 January 2010. This can be attributed to the fact that primary insurers were able to rebuild the capital lost as a consequence of the financial market crisis more quickly than had been anticipated. Another factor here was the untroubled catastrophe loss experience in the year just-ended. Should 2010 similarly be spared sizeable (natural) catastrophe events, the pressure on premiums will be sustained. What is more, sufficient reinsurance capacity is available in the market.
Rate reductions were especially marked in the United States; this was true of property catastrophe covers as well as workers' compensation and personal accident insurance. Price increases were, however, possible in areas where programmes had suffered losses, such as property business in the Mid-West.
We obtained stable rates in our domestic German market. The events of 2009 – the earthquake in Abruzzo as well as hailstorms – prompted price increases in Italy, the extent of which nevertheless fell short of our expectations. A price decline in France was prevented by winter storm “Klaus”, and rates were either unchanged or even rose in some areas. The increased claims frequency caused prices in Central and Eastern Europe to move higher – while exposures were at the same time reduced.
In view of the conditions on the markets, we are satisfied with the outcome of the renewals in worldwide catastrophe business. In Japan, another major market for natural catastrophe covers, treaties are renewed on 1 April rather than 1 January. In contrast to 2009, we anticipate rate reductions in the current financial year.
We are seeing consistent demand for agricultural covers, which protect inter alia against risks to crops and livestock. This market will continue to expand on account of the growing importance attached to food security. We support our clients with product development activities and cooperate with international organisations with an eye to leveraging potential openings.
The retakaful segment continues to show considerable promise. We anticipate further premium increases in the coming years. In 2010 growth is to be expected above all in engineering business in Saudi Arabia and Abu Dhabi. Given that the insurance density in Arab markets is still relatively modest overall, retakaful business still offers substantial potential.
In the area of facultative reinsurance, i.e. the underwriting of individual risks, only around 40% of our portfolio is renewed as at 1 January. We achieved largely stable rates here. In Europe we enlarged our market shares in certain segments, such as French casualty business. While prices similarly remained unchanged in US casualty business, marked premium erosion was witnessed in property business. Premiums in Asia grew, and we are looking to further extend our participation here. Expectations of improved rates in the energy sector have so far failed to materialise. On the whole, it is our assumption that the premium volume in facultative reinsurance will grow.
All in all, terms and conditions in worldwide non-life reinsurance continue to be favourable for Hannover Re. Our financial strength puts us in a better position to profit from the available market opportunities. Our excellent rating smoothes our path towards generating attractive business. In non-life reinsurance our focus remains firmly directed towards profitable niche markets, and we expect business to develop very favourably in the current year and beyond.