E+S Rück: P&C Re price increases and improved conditions expected at 1.1

E+S Rück, Hannover Re’s German business, has said it expects further price increases and improved conditions for P&C reinsurance renewals at 1 January 2024.

The subsidiary said that natural disasters and persistent inflation have pushed up reconstruction and repair costs in Germany, which has adversely affected the sector’s profitability.

"We must assume that the multi-year trend towards higher claim payments will continue. Adequate prices are indispensable if we are to be able to offer our clients the best possible reinsurance capacity in the future, as we have in the past," said Michael Pickel, CEO of E+S Rück, at this year's reinsurance gathering in Baden-Baden.

Pickel continued that in a time of increasingly interdependent challenges, it is vital that reinsurers work with clients to design effective solutions.

Specifically in Germany, E+S Rück highlighted that coverage and claims costs from heavy rain, flood, windstorm and hail remain a pressing concern.

Considerable claims expenditure from summer storms Lambert and Kay mean substantial losses from cat covers are expected in 2023.

High inflation and the trend towards adding natural perils covers to existing contracts is expected to drive claims expenditures for the industry ever higher.

Further rate increases are also expected amid tight overall reinsurance capacity, while demand for natural perils cover is on the rise.

The capacity offered by existing and new cyber market players is expected to result in price stabilisation. But the pressure to make adjustments remains in light of rising claims expenditures.

E+S Rück said growing efforts to control and limit cyber accumulation scenarios had been evidenced in contract terms and conditions.

Inflation concerns continue

Inflation is placing pressure for adjustments in industrial and commercial business, as well as for property.

Claims numbers and expenditures from large fire losses have increased, which are expected to be reflected in modified scopes of coverage and conditions.

Average claims in motor insurance have also surged this year as tariff adjustments have failed to achieve the desired effects.

"Sharply above-average increases in the costs of spare parts and repairs as well as higher claims frequencies are causing massive losses and remain a heavy drag on motor insurers' profitability," said Pickel.

"Against this backdrop, we take the view that adjustments to prices in motor insurance are unavoidable in the coming years to move out of the red and restore business to a profitable footing over the long term. We expect to see gradual progress in this respect."

E+S Rück added that issues of inflation will continue to dominate conversations around liability lines, particularly in assessing the insurability of risks such as per- and polyfluoroalkyl substances.