Hannover Re grows life and health reinsurance book

Hannover Re’s life and health (L&H) franchise is expanding on the back of improving Covid experience and strong demand for capital‑efficient solutions, even as the group’s near‑term top‑line momentum remains more pronounced in property and casualty (P&C).

In 2022, gross premium volume in L&H reinsurance rose by 5.8% to EUR 9.0 billion. Net premium earned increased by 6.9% to EUR 8.0 billion, showing that growth is translating through to earned exposure rather than being confined to front‑loaded new business.

Covid‑related drag on the L&H book is receding. Expenditures connected to the pandemic were halved in 2022 to EUR 276 million, with the bulk of this amount attributable to mortality covers in the United States. For cedants, that reduction in pandemic loss emergence supports more stable experience assumptions and reduces the risk margin and capital volatility that had been associated with US mortality treaties.

On the asset and capital side, the improving claims profile in US mortality reinsurance is relevant for insurers using reinsurance to manage Solvency II or local capital charges on biometric risk, as lower volatility in ceded portfolios can support more predictable solvency ratios and, in turn, more stable investment risk budgets.

Under IFRS 17, Hannover Re’s new business contractual service margin (CSM) in L&H reinsurance amounted to EUR 151 million in the first half of 2023. While lower than the prior‑year period, this still represents a meaningful stock of future profit from new treaties, which is important for primary insurers assessing counterparty strength over the life of long‑dated longevity or financial solutions deals.

Reinsurance revenue (gross) in L&H contracted slightly to EUR 3.9 billion in the first half of 2023, indicating a modest top‑line pause after the strong 2022 expansion. However, the reinsurance service result in L&H improved by 62% to EUR 481 million over the same period, showing a sharp improvement in underlying profitability. For cedants, this combination – flat revenue but stronger service result – points to tighter pricing, better risk selection or improved experience, all of which matter for the sustainability of reinsurance capacity on capital‑intensive lines.

Hannover Re reports sustained strong demand in L&H reinsurance, particularly in financial solutions, longevity covers and traditional business. This aligns with primary insurers’ continued use of reinsurance to support balance sheet optimisation, including capital relief, earnings smoothing and support for new business strain in protection and savings portfolios. For ALM and investment teams, the growth of financial solutions and longevity reinsurance is directly relevant to the scale and duration of asset portfolios backing annuity and long‑term protection liabilities.

At group level, Hannover Re expects to grow reinsurance revenue in total business by at least 5% in 2023, assuming constant exchange rates. Based on the 1 January 2023 treaty renewals, currency‑adjusted growth in reinsurance revenue should again be stronger in P&C than in L&H. That relative tilt suggests that, while L&H is growing and becoming more profitable, P&C remains the primary driver of near‑term top‑line expansion and capital deployment.

In P&C, Hannover Re achieved an inflation‑ and risk‑adjusted price increase of 8.0% on renewed business at 1 January 2023. Total premium volume booked in 2022 in traditional P&C reinsurance amounted to EUR 15,543 million, excluding facultative, ILS and structured reinsurance, with treaties totalling EUR 9,870 million – or 63% of that business – up for renewal at 1 January 2023. In response to the risk environment, Hannover Re grew its non‑proportional book by 21.4% in the renewals to a premium volume of EUR 3,162 million, shifting further towards layers where pricing has hardened most.

In facultative reinsurance, Hannover Re anticipates growth of more than 10% on an underwriting year basis for 2023, adding another channel of risk‑adjusted premium growth. For primary insurers, this combination of higher prices, more non‑proportional exposure and facultative expansion means reinsurance capacity is available but at terms that more explicitly price for inflation and volatility, with direct implications for retained risk and capital buffers.

Within its home market, Hannover Re operates through E+S Rückversicherung AG, the subsidiary responsible for the German market, which remains a key platform for both P&C and L&H relationships with domestic insurers.

For insurance CIOs and capital managers, the message is that Hannover Re is growing its L&H reinsurance book on a more profitable footing, while allocating incremental capital more aggressively to P&C where pricing has moved fastest, strengthening its capacity to support life insurers’ capital and ALM strategies over the long term.