Non-life reinsurance

Overview

We are broadly satisfied with conditions in non-life reinsurance. The renewals as at 1 January 2011 – the date on which 67% of our treaties in traditional reinsurance were renegotiated – passed off better for our company than the market players had generally expected. Despite softer market conditions, we had sufficient opportunities to write profitable business. All in all, we were able to enlarge the premium volume by 2% in this round of renewals.

Even though rates declined sometimes substantially on account of the healthy capital resources enjoyed by primary insurers and the absence of market-changing major losses in the developed markets, we were nevertheless able to maintain prices on a stable level in many instances – including for example in US casualty business involving small and mid-sized risks. As a direct consequence of the heavy loss expenditure associated with the sinking of the “Deepwater Horizon” drilling rig we obtained appreciable price increases on covers for offshore oil exploration. While original rates climbed by around 20%, price increases of roughly 25% were attainable in non-proportional reinsurance. We also succeeded in pushing through higher prices in European motor liability business.

The treaty renewals for US catastrophe business were, however, disappointing. Rates for the most part declined in the absence of losses from hurricanes. In keeping with our policy of active cycle management we reduced our exposure. In areas where major disasters occurred, such as the earthquake in Chile, the positive effects on the price level remained within regional bounds and failed to usher in a worldwide trend reversal. 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.