FRANKFURT, Feb 3 (Reuters) - Germany’s Hannover Re said substantial price declines in some reinsurance markets at the start of the year did not threaten its goal of earning about 950 million euros ($1.04 billion) in net profit in 2016.
“Even though the price decline in some markets was considerable, our broad diversification enabled us to secure a level of profitability for our portfolio that can still be described as good, so that we do not anticipate any impact on our profit targets for 2016,” Chief Executive Ulrich Wallin said in a statement on Wednesday.
The world’s third largest reinsurer said it was “largely satisfied” with the outcome of talks to renew reinsurance contracts with its insurance company clients in January, saying its premium volume had fallen only modestly despite the downward price pressure.
About two thirds of Hannover Re’s property and casualty reinsurance premiums were up for renewal at the start of the year, with the renewed volume falling by 1.5 percent to 4.36 billion euros, the company said.
Reinsurers such as Hannover Re, Munich Re and Swiss Re act as a financial backstop for insurance companies, helping them pay for large damage claims from hurricanes or earthquakes in exchange for part of the premiums.
Prices in the reinsurance market have been falling for several years, driven down by a lack of demand from insurance companies as well as oversupply fuelled by new entrants to the market and an accumulation of surplus capital because of unusually low damage claims from natural catastrophes.
Among the hardest hit business areas were marine reinsurance, where prices fell in almost all lines and regions despite big damage claims from explosions at the Chinese port of Tianjin, energy, aviation and natural catastrophe reinsurance.
“The severe flooding in the United Kingdom in December 2015 had no effect on the January renewals because the scale of the losses is still not entirely clear,” Hannover Re said, adding that the floods could be expected to have an impact on reinsurance contract talks later this year.
While overall supply continues to exceed demand, there were signs that the price drop was bottoming out, Hannover Re said, pointing out that there were already indications of this in the U.S. market last year.
$1 = 0.9156 euros Reporting by Jonathan Gould; Editing by Maria Sheahan
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