Talking to The Insurer TV about Hannover Re’s wider sustainability measures, which include strengthening internal governance structures and seeking more dialogue with stakeholders and peers to reduce the protection gap, Henchoz said the group planned to accelerate on reducing its carbon footprint and developing its asset management strategies and underwriting activities in line with ESG principles. 

Henchoz – Hannover

However, the underwriting side is “the most complex” and while “steady progress” is being made on the facultative side, the treaty side of the business is more problematic due to a lack of transparency on the ultimate risk. 

“In facultative single risk underwriting, we’re trying to exclude some risks in the future and the coal industry is a good example of this, but we’re also promoting renewable energy which is another illustrative example of good progress being made,” said Henchoz. 

“The treaty reinsurance is the big challenge because you don’t have the same level of transparency on the ultimate risks which are included in the coverage,” he added. 

In order to work through this, Henchoz said there needs to be greater dialogue with customers, especially those “who are also committed to a greater extent too to be better corporate citizens and exclude some risk classes”.

But for Henchoz, it’s not just about excluding risk classes. 

“It’s also important to promote transition, but we need more transparency first and then we need to work with our clients towards targets aiming at contributing to the Paris Agreement targets for 2050 and as an industry, we can do a lot in climate change adaptation,” Henchoz added.

Jean-Jacques Henchoz, CEO, Hannover Re

Modelling correction needed 

Sticking with climate change, while talking about the recent flooding in Europe, Henchoz said: “Even if it’s difficult to demonstrate, I think climate change is a big big driver of the changes we’re seeing today.”

He added: “My sense is that from a modelling point of view, clearly there is a correction to be made. These events are more frequent and they are more severe than anticipated.” 

However, looking specifically at the flooding in Germany, Henchoz said that while it is “astonishing”, it’s not “totally outside of the charts”, but he expects these big events, including the wildfires in Europe to “have a bearing on modelling and the pricing of the business”.

Thinking about the cat events of 2021 and how these will influence negotiations in the run-up to the 1 January renewals, Henchoz said loss activity is going to have an impact.  

“Of course we don’t focus only on price and terms and conditions – there is an overall relationship to be strengthened and that’s also what we do during the renewals and in the preparation for the renewals,” said Henchoz. 

“But clearly the loss activity drives decision making and there are still discussions to be had,” Henchoz affirmed. 

Outside of nat cat events, Henchoz said there are some specific discussions to be had, citing cyber as an example where Hannover Re wants to “switch its exposure to direct cyber treaties so exclusions need to be put in”.

But otherwise, Henchoz concluded: “It’s all about helping our customers to execute their growth strategies, some restructuring and I think one of the big topics with our clients is going to be structured reinsurance and more tailor-made solutions.”

He added: “I would say this would be a very professional [renewal] in the sense of continuity.  There is no disruption in the market and we don’t want that. We see continued momentum and a need for discipline and I would anticipate in January that the prices will continue to firm.”