Hannover Re’s Chief Executive Officer (CEO), Jean-Jacques Henchoz, has said that an industry loss ranging between $30 billion and $40 billion from the Los Angeles, California wildfires, could result in a net loss of €500 million to €700 million for the German reinsurer, which is above its first-quarter large loss budget of €435 million.
Earlier this morning, Hannover Re held a conference call following the release of its 1/1 reinsurance renewals outcome.During the call, the CEO, along with Sven Althoff, Member of the Executive Board for Property & Casualty, discussed the potential impacts of the recent wildfires on the company and the market.
Henchoz said: “It is still too early to assess the size of this very significant loss for the economy and its impacts on insurance and reinsurance, but I’d like to give you some indication on what this loss might mean for Hannover Re.
“Based on internal modelling and scenario analysis, and not on a detailed bottom up estimate, we would expect that an industry loss of between $30 and $40 billion could result in a net loss in a range of €500 to €700 million for Hannover Re.
“This would exceed our large loss budget of €435 million for the first quarter. The remaining large loss budget for the full year, and our balance sheet strength will enable us to absorb this loss and meet our guidance for the full year, which remains unchanged, as communicated in November.”
Furthermore, Hannover Re is projecting a net income of €2.5 billion for 2025, and its large loss budget for the year stands at €2.1 billion. At the top end of this range, the wildfires would have eroded a third of the reinsurer’s large loss budget for the entire year, and roughly 24% of the budget at the lower end, and 29% at the mid-point of the range.
Since the Los Angeles wildfires, there’s been debate across the industry around the impact on property catastrophe reinsurance rates at future 2025 renewals after some softening was seen at the January 1st 2025 renewals.
Both Althoff and Henchoz went on to address this on the call.
“When it comes to forthcoming renewals in California, of course, the loss will be taken into account. So, it is fair to assume that the loss experience from the wildfires will, as a minimum trigger rate and premium increases, but in some instances, it may also trigger increases of retention levels of our ceding companies,” Althoff said.
Henchoz added: “Recent loss experience for the industry, particularly the LA wildfires, will likely stabilize terms and conditions in 2025.”
Hannover Re was also asked about potential rising demand for backup covers after the wildfires, given the fact that losses for some cedents may exhaust their reinsurance coverage.
“We have not received any requests so far. So, I guess clients are reviewing the situation. Depending on the profile of their portfolio, they still have to decide whether they approach reinsurers on a one event or two event basis. If they do the latter, then of course, the question for backup coverage becomes even more prevalent,” explained Althoff.
He continued: “So, nothing concrete to report so far. But of course, in long-term partnerships, we would be open for discussions on that side. But a little too early to tell.”
We previously reported that initial loss estimates from the Los Angeles wildfires from reinsurance firm RenaissanceRe and global re/insurer Chubb may raise concerns across the industry, as RenRe based its estimate on a $50 billion industry loss event, while Chubb also seems to be working from a relatively high industry figure, too.
