Hannover Re ranks among the market leaders in marine reinsurance.

The general business environment in this area improved in the year under review, as world trade increasingly bounced back from the adversities of the 2008 financial and economic crisis. The pace of recovery is, however, slowed by the euro crisis, since uncertainties about the stability of the currency and the Eurozone’s ability to hold together has negative repercussions on the transport of goods. Overall, though, we are satisfied with conditions; demand in marine business largely remained stable, while the Asian region actually delivered growth.

Market capacities are in some cases exhausted owing to large-volume construction projects in the offshore sector and their considerable risk exposure. Reinsurers, too, are coming up against the limits of their capacity on account of the increases in value associated with existing oil platforms and the high exposures for construction risks arising out of the building of new platforms.

On the claims side the marine line was significantly impacted in the year under review. Particularly important here was the wreck of the “Costa Concordia” cruise ship, which resulted in an insured market loss in excess of EUR 1 billion. The burden from this loss event for Hannover Re amounted to EUR 53 million. Reactions on the original markets to these events were mixed: while hull insurers were restrained in their rate adjustments, very marked price increases are to be expected for Protection & Indemnity (P&I) covers on both the insurance and reinsurance side. We also incurred sizeable losses from Hurricane Sandy.

The strategy behind our underwriting policy in the 2012 financial year was once again to further improve the regional diversification of our portfolio. We gained market shares inter alia in Asia and Brazil. On the other hand, we continue to write offshore risks in the Gulf of Mexico conservatively in view of the considerable natural hazards potential.

Rates in cargo insurance held stable or slipped back slightly in the year under review. This was also true of marine liability insurance, with the exception of special P&I covers. In view of the heavy losses incurred by reinsurers from shipping accidents, we were able to obtain significant pricing and structural changes for P&I reinsurance arrangements under the loss-impacted programmes effective 1 January 2013. It was also possible in 2012 to push through structural changes in relation to prices and retentions for offshore risks – as a consequence of the incident involving a large FPSO (floating production, storage and offloading) unit as well as a number of smaller loss events.

The underwriting result for our marine business reflects the considerable strains from major losses. The combined ratio consequently rose from 73.6% to 114.8%.