Hannover Re targets selective growth in Latin America and Europe as competition intensifies

Hannover Re is preparing to pursue selective growth in Latin America and Europe as increased market capacity puts pressure on reinsurance prices ahead of the January 2027 renewal season.

The German group expects property and casualty reinsurance prices to decline slightly, while contractual terms, conditions and insurers’ retentions remain broadly stable. Management nevertheless believes that opportunities are available in markets with growing insurance penetration, economic expansion and demand for natural catastrophe protection.

The strategy is based on maintaining underwriting discipline rather than seeking volume across the entire market. Hannover Re said it will expand where prices adequately reflect the underlying risks and withdraw from contracts that fail to meet its profitability requirements.

This approach comes as the reinsurance industry confronts two opposing forces. Insurers continue to demand additional protection against natural disasters, inflation, cyber incidents and geopolitical disruption. At the same time, the healthy capital position of the reinsurance market has increased available capacity and intensified competition, particularly in programmes that have not recorded losses.

Chief executive Clemens Jungsthöfel said inflation, digital threats, climate-related events and geopolitical tensions are making it more difficult to estimate long-term claims costs. These conditions place greater importance on risk assessment and pricing as reinsurers decide where to deploy capital.

Latin America offers long-term expansion potential

Latin America is one of the regions where Hannover Re expects demand to grow. Insurance penetration remains comparatively low across much of the continent, leaving a substantial difference between the economic damage caused by major events and the losses covered by insurance.

That protection gap was again visible during 2026. The region experienced wildfires in Chile, a volcanic eruption in Guatemala and earthquakes in Venezuela and Colombia. While the financial impact of the fires and eruption was limited, the earthquakes caused deaths and extensive property damage.

Hannover Re expects these events to increase demand for insurance and reinsurance coverage in the affected markets. The company views Latin America as a long-term growth region despite the volatility associated with natural catastrophes and economic cycles.

The group booked a €75 million provision for the earthquake in Venezuela during the first half of the year. That exposure illustrates both the risks of expanding in the region and the commercial need for additional protection against events capable of producing losses across multiple insurers.

Hannover Re has not announced specific capacity targets for Latin America or identified individual countries where it intends to increase its market share. Its position instead reflects a wider expectation that economic development, higher insured values and greater awareness of climate risks will gradually expand the regional reinsurance market.

The pace of that expansion will depend on whether primary insurers can increase coverage among companies, households and public institutions while maintaining premiums that adequately reflect local risks.

European growth will vary by market

In Europe, Hannover Re increased its market share during 2026 as demand for reinsurance remained high. The group described prices and contract conditions across the region as broadly stable, although the outlook differs considerably between countries and business lines.

Loss-free programmes are likely to face further price reductions because insurers and reinsurers remain well capitalised. However, claims inflation, more frequent medium-sized losses and exposure to heatwaves, wildfires, hail and severe storms are limiting the scope for broader price cuts.

The German insurance market remained generally profitable during the past year. Motor insurance stabilised following previous corrective measures, although repair costs, claims inflation and losses caused by hail continue to affect the segment. Competition is also producing signs of softer pricing in industrial insurance.

In France, additional capacity has increased pressure on prices, partly offset by higher claims costs. The United Kingdom has recorded reductions in property and motor reinsurance, while liability prices have been more stable. Hannover Re expects contract selection and the quality of each underlying portfolio to become more important as competition increases.

Markets in Central, Eastern and Southeastern Europe, including Türkiye, have generally maintained prices considered adequate for the risks involved. However, heatwaves, heavy rainfall, hailstorms and tornadoes are becoming more relevant in insurers’ loss calculations.

Northern European markets continue to generate high demand for coverage, but reinsurers are competing more aggressively for programmes that have avoided large claims.

The result is not a uniform European expansion strategy. Hannover Re plans to increase business selectively according to customer quality, claims history, exposure and pricing, rather than applying the same growth target across every national market.

Cyber and catastrophe coverage remain priorities

Alongside its regional strategy, Hannover Re sees further growth opportunities in cyber insurance, structured reinsurance and natural catastrophe coverage.

Demand for protection against natural disasters is expected to rise over the long term as climate change, inflation and the concentration of infrastructure and other valuable assets in exposed areas increase potential losses.

Natural catastrophe reinsurance prices have fallen from the peaks reached in 2023 and 2024. Hannover Re nevertheless considers current levels technically adequate in many markets and is prepared to offer additional capacity where contract terms and pricing meet its requirements.

Cyber coverage is also expanding as companies and public institutions confront ransomware, data breaches and interruptions to digital infrastructure. Structured reinsurance, meanwhile, allows insurers to manage regulatory capital requirements and reduce volatility in their financial results.

These areas offer growth, but they also require careful modelling because historical loss information may be limited or become less reliable as technology and climate conditions change.

Capital strength supports additional capacity

Hannover Re enters the renewal negotiations with a strong capital position. The group’s net income increased by 7% to €1.4 billion in the first half of 2026, while return on equity reached 21.5%.

Its property and casualty combined ratio improved to 83.2%, compared with 88.4% a year earlier and below the company’s full-year target of less than 87%. A ratio below 100% means that the underwriting business generated a profit before investment income.

The improvement was supported by major-loss expenditure of €784.7 million, below the €1.02 billion budgeted for the period. Hannover Re also established a €200 million reserve for potential claims associated with the conflict involving Iran.

The group’s Solvency II capital ratio stood at 254% at the end of June, above its internal threshold of 200%. This provides capacity to support existing clients and take on new contracts without weakening its capital position.

However, premium growth has not been uniform. Property and casualty reinsurance revenue declined by 8% to €8.8 billion during the first half, or by 3.9% after adjusting for currency movements.

By contrast, the volume renewed in June and July increased by 12.3%, while risk- and inflation-adjusted prices fell by 4.5%. These figures reflect the competitive conditions facing the sector and the balance Hannover Re must maintain between expansion and profitability.

The company continues to expect net income of at least €2.7 billion for 2026.

The January renewals will test pricing discipline

The January 2027 renewals will determine how much of Hannover Re’s growth ambition can be converted into new premium volume.

The group plans to make at least stable capacity available, but additional deployment will depend on whether prices compensate for inflation, climate exposure, geopolitical uncertainty and rising insured values.

For Latin America, the opportunity lies in reducing the gap between economic and insured losses. In Europe, growth will depend more heavily on gaining share from competitors and selecting profitable portfolios within established insurance markets.

Hannover Re therefore enters the next renewal cycle with capital available for expansion but without committing to growth at any price. Its ability to increase business in Latin America and Europe will depend on whether demand for protection is accompanied by contract terms that preserve underwriting returns.