Hannover Re likely to renew similar retrocession for 2026, unless pricing attractive: Althoff

Hannover Re is currently operating on the assumption that its retrocession needs for 2026 will result in a similar placement as we saw at the start of this year, unless pricing proves particularly compelling to purchase more, Sven Althoff, Member of the Executive Board for Property & Casualty (P&C) explained today.

At the start of 2025, Hannover Re increased its natural catastrophe retrocession at the January reinsurance renewals by EUR 100 million to a little more than EUR 1.2 billion, with growth in the aggregate excess of loss and whole account excess of loss covers more than offsetting a reduced K-Cessions sidecar for the year.

It’s worth also noting that since the reinsurance renewals at the start of the year, Hannover Re has added more retrocessional protection through its catastrophe bonds.

The company has sponsored three catastrophe bonds so far this year, securing $200 million of worldwide peak peril aggregate cover through the 3264 Re Ltd. (Series 2025-1) in January, then $20 million of cloud outage cyber retro through Cumulus Re (Series 2025-1) in March, and most recently a further $150 million of North American peak peril occurrence and aggregate retro through its 3264 Re Ltd. (Series 2025-2) cat bond deal.

As a result, Hannover Re’s retrocession program stands strong this year, with catastrophe bonds an larger proportion of the overall protection and the capital markets a meaningful provider of retro capacity for the reinsurer.

Speaking today during an analyst call, answering a question on Hannover Re’s intentions for retrocession for 2026, Sven Althoff explained he doesn’t anticipate much in the way of changes at this stage.

“On the P&C retro side, we are currently in the planning phase for next year. Our base assumption is that, when it comes to our property and specialty protections, we will buy more or less exactly what we have purchased in ’25 so no intention to buy significantly more or less,” Althoff said.

But he added, “Of course, we will observe the market, and if we should find later in the year that the pricing offered by the retro market is particularly attractive, we may buy a little more.”

Of course, retrocession pricing has proven attractive to some at the mid-year renewals in 2025, as it softened faster than primary reinsurance.

But Hannover Re has plenty of options available to it, from its traditional retro, its K-Cessions quota share sidecar like structure, as well as its growing catastrophe bond programs.

At this time Hannover Re has some $1.11 billion of catastrophe bond supported protection outstanding, which has increased from close to $879 million one year ago.

So the cat bond market is already providing a larger amount of retro protection to Hannover Re in 2025. If cat bond market pricing continues to be conducive over the coming months it is always possible we see that increase, either later this year or early in 2026.

But the base case remains to construct a retrocession program at a similar level to the current one, for Hannover Re in 2026, Althoff reiterated.

Explaining, “Of course, also the retro pricing is fully dependent on how the rest of the year is going to perform from a major loss point of view.

“So therefore, base assumption is we are going to place what we have placed in 2025 again.”

Also read: Hannover Re cedes few losses to ILS in Q2, cites “modest price declines” at mid-year renewal.