Voice of stability – Henchoz sets scene for orderly 1/1

The Voice of Insurance podcast featured Jean-Jacques Henchoz, CEO of Hannover Re, just before the reinsurance industry’s senior figures and their cedants and brokers head to Monte Carlo for the annual Rendez-Vous-de-Septembre (RVS).

There is always considerable suspense before the reinsurance sector decamps to Monaco for its annual pre-renewal rendezvous in early September.

In part it is because the hurricane season, the primary reinsurance peril and driver of market turns, is well underway by this point of the year, adding a caveat to any market discussions.

That said, every broker, underwriter and market commentator sets out their talking points at the RVS – usually crammed into surprisingly small tables for what look like speed dates in Monte Carlo’s pricey cafes and luxury hotel lobbies.

Hannover Re’s usual press breakfast brings a certain Germanic no-nonsense to proceedings, chaired in recent years by the reinsurance giant’s chief executive, Jean-Jacques Henchoz.

As Voice of Insurance podcast host Mark Geoghegan pointed out the episode’s opening remarks, Henchoz is a straight-talking and honest communicator, with a direct style that comes as a refreshing tonic to the smooth-talking patter one may experience from time to time around the principality’s salons.

“I don’t think I have met a CEO yet who better personifies his company’s brand,” Mark noted.

Henchoz’s take on last year’s 1/1 renewal is therefore of particular interest for many reasons, and particularly in the context of what happened at the end of last year. On a reinsurance market basis, the last 1/1 renewal has been described as “chaotic” and “disorderly” by many cedants.

Many cedants assembled their programmes later than usual and made retention compromises on retentions for lower-level attachments retentions – at which prices rose astronomically – but that may have cost them more in hindsight by retaining risks, amid the catastrophe activity already witnessed in 2023.

“We were forceful, but also partnering with our clients to find a good way to adjust the terms,” Henchoz stated.

As part of that desire to avoid the buck being passed lower down, it was short-tail risk proportional reinsurance business that Henchoz found increasingly unattractive, adding that: “I think the main impact was the shift to non-proportional business.”

Fast-forward to the mid-year point and Henchoz said he was “much happier than I was”, with improved results for the first half of 2023. However, he emphasised the need to knuckle down to serious debate with cedants to ensure risk transfer continues to fulfil its function, with the need to maintain coverage in mind, in the wake of destructive catastrophe events such as recent US wildfires and storms.

“These are very big topics, which are not going away anytime soon. That’s why we need to work with our customers to make sure we tackle these exposures, and that we have the right price, the right terms going forward. But clearly compared to last time we met in Monte Carlo last year, I think we’re in a stronger place with a better outlook,” Henchoz added.

The hard market will go on next year, he emphasised, with no sudden influx of cheap capacity likely from outside investors or inside from reinsurers dedicated to showing continued discipline.

“I am convinced the market will stay strong: we have a disciplined market; we don’t have a disruptive market,” he said.

“All the players – like Hannover Re – are really cautious on managing their exposures, those dynamics will play into 2024, I’m quite sure of it. Of course, a lot can happen. But potential capital providers will wait and see. I don’t see a trend of seeing a lot of fresh capital coming into the industry sooner than expected. So, for me, 2024, will be relatively similar to 2023,” Henchoz added.