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A very special industry event has been taking place in the Principality of Monaco for decades. The name “Rendez-Vous de Septembre” glorifies how hard the fight for money is in the reinsurance market. | Photo: Imago Images / Design Pics
It is the annual get-together of the reinsurance industry: the “Rendez-Vous de Septembre” industry meeting has been taking place in the Principality of Monaco since 1957. But instead of romance, the focus since last Saturday has been on hard numbers with 3,000 participants from around 80 countries. For four days, the companies will be working with their customers and brokers to sound out prices and conditions for the major contract renewal at the turn of the year.
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Reinsurers remain in good negotiating position
The big players such as global market leader Munich Re, Swiss Re and Hannover Re expect continued high demand from their customers such as Allianz, Ergo and Co. After all, the risks from natural disasters, liability claims and cyber attacks are unlikely to decrease. According to Swiss Re, insured losses from natural disasters alone have exceeded the 100 billion US dollar mark (around 90 billion euros) every year in the past four years.
Experts see end of price increases
Reinsurance protects insurers from high losses due to unexpected claims, which are becoming increasingly common, particularly as a result of climate change, but also due to cyber attacks. In recent years, the industry has increased its prices significantly and has mostly been able to do so, resulting in a surge in profits. Now, according to many experts, this trend is likely to come to a temporary end. The rating agency Fitch believes that the peak has already been passed and has lowered the outlook for the industry to “neutral”.
A good year in 2023 is not enough for the industry
According to Hannover Re, there are now slight price reductions in some primary insurance markets. CEO Jean-Jacques Henchoz nevertheless insists on keeping the premiums for reinsurance protection at an appropriate level, as was announced at the industry meeting. The global market leader is likely to see it similarly. The reinsurance market is currently “in a reasonable balance,” as Thomas Blunck, CEO of Munich Re, said. But: “One swallow does not make a summer.” A good year like 2023 is nowhere near enough to compensate for the four bad years before it.
As always, providers are quick to threaten to withdraw from the business if they cannot enforce their terms. Last year, reinsurers stepped on the brakes when it came to insurance against natural disasters such as floods. They simply no longer cover small and medium-sized risks, much to the annoyance of primary insurers.
Forecast: Premium income increases slightly less
For the years 2024 to 2026, Munich Re expects inflation-adjusted premium growth of an average of 2 to 3 percent per year in property and casualty reinsurance. Hannover Re made a similar statement at the start of the week. In the three years prior to that, however, premium income had increased by around 4 percent per year. Here, too, inflation-related price increases were added to the mix.
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Reinsurers put pressure on motor insurers
Due to increased spare parts prices and construction costs, the so-called damage inflation hit motor vehicle and building insurance in particular. Car insurers have been struggling with losses since last year and some are already withdrawing from the business. Accordingly, motor vehicle insurance was a major topic at this year’s industry meeting in the principality, as reported by the “Süddeutsche Zeitung” (SZ) among others. The message was clear: drivers must prepare for sharp price increases.
According to the SZ report, many insurers have been cautious about price increases in the sector so as not to alienate their customers. But they can no longer afford to be so cautious. A large part of the reserves have been used up and the reinsurers have, for their part, imposed high prices for the protection covers. The price increases for 2025 must therefore be higher than the eight to nine percent for 2024, according to the demand of Michael Pickel, board member at Hannover Re. “They must definitely be in double figures.”
Liability claims in the USA remain a major problem
The SZ newspaper writes that reinsurers are particularly concerned about liability insurance in the USA. Courts there are awarding increasingly higher damages against companies in class action lawsuits. “We are observing a continuous increase in aggressive litigation practices, which are particularly problematic for liability insurance,” says Gianfranco Lot, a manager at Swiss Re. According to the company’s calculations, this trend has led to a 57 percent increase in liability losses in the USA to 143 billion dollars (129 billion euros) over the past ten years.
The industry has made a number of mistakes in liability risks in recent years, says Munich Re board member Stefan Golling. “We have clearly failed to correctly assess claims and inflation trends.” The insurance industry has been too optimistic and tolerated prices that are too low for too long. “We cannot continue like this.”
