Rein­sur­ance rates poised to fall ‘a bit’ next year: Han­nover

The Pak Banker - - Company& -

MU­NICH: Han­nover Re, the world's third-biggest rein­surer, said rates may de­cline in 2011 as this year's claims weren't se­vere enough to turn the mar­ket.

"Our ex­pec­ta­tion for rein­sur­ance rates in prop­erty and ca­su­alty rein­sur­ance to fall a bit in 2011 has been con­firmed so far in our re­newal talks," said Juer­gen Grae­ber, the man­age­ment board mem­ber re­spon­si­ble for spe­cialty lines such as avi­a­tion and space, off­shore en­ergy as well as credit, surety and po­lit­i­cal risks. "We are still on a tech­ni­cally ad­e­quate level that al­lows us to earn our costs of cap­i­tal."

Han­nover Re last month raised its 2010 profit tar­get to more than 700 mil­lion eu­ros ($925 mil­lion) and aims to post net in­come of about 650 mil­lion eu­ros in 2011. The biggest claim for the in­surance in­dus­try this year was the Chile earth­quake in Fe­bru­ary with es­ti­mated in­sured losses of $8 bil­lion, ac­cord­ing to Mu­nich Re, the world's largest rein­surer.

"At year-end 2010 rein­surer cap­i­tal has grown to record high lev­els," rein­sur­ance bro­ker Aon Ben­field said in a Dec. 16 state­ment. "Rein­sur­ance sup­ply will con­tinue to out­pace de­mand, putting fur­ther down­ward pres­sure on rates."

Han­nover Re, which ex­panded credit and surety rein­sur­ance when pri­mary trade­credit in­sur­ers such as Euler Her­mes SA or Coface SA were hit by a rise in bank­rupt­cies dur­ing the eco­nomic slump, seeks to ex­pand the unit at "a high sin­gle-digit or low dou­ble-digit" rate in 2011, Grae­ber said in the in­ter­view.

Trade-credit in­sur­ers, which pro­tect pay­ments to sell­ers when buy­ers can't meet obli­ga­tions, help cover more than $2 tril­lion of re­ceiv­ables world­wide, ac­cord­ing to the In­ter­na­tional Credit In­surance & Surety As­so­ci­a­tion. In turn, they seek pro­tec­tion by pass­ing some of the busi­ness on to rein­sur­ers such as Han­nover Re or Mu­nich Re.

Han­nover Re, based in Hanover, Ger­many, ex­pects pre­mium in­come in its credit and surety di­vi­sion to rise to about 600 mil­lion eu­ros this year from 480 mil­lion eu­ros in 2009.

"Cus­tomers won't with­draw the ca­pac­ity we gave them in times of need even as the mar­ket has moved from a 40 per­cent ca­pac­ity to about 150 per­cent by now," Grae­ber said. The rein­surer is closely watch­ing de­vel­op­ments in U.S. ca­su­alty rein­sur­ance, ac­cord­ing to Grae­ber, who said that rates in the seg­ment, which in­cludes di­rec­tors' and of­fi­cers' in­surance, work­ers' com­pen­sa­tion and prod­uct li­a­bil­ity cov­er­age, aren't fully fac­tor­ing in the an­tic­i­pated rise in in­fla­tion and the low in­ter­est rates. -Bloomberg

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