As Dr Hinsch explains to Commercial Risk Europe: "The German book was down while the international business was up. The lack of growth in the German book was due to the re-underwriting to focus on more profitable business. In such an environment you cannot really expect growth and this is fine with us."
The fact that HDI Global's re-underwriting strategy is working was underlined by the improvement in its underwriting result. Dr Hinsch says this performance is explained by three factors. First, the company's large loss budget was unexhausted by some 20%, mainly because the insurer suffered no major catastrophic events during the year. Second, re-underwriting of the German property book has led to a reduction in the group's overall exposure. Shares were reduced, prices raised and self-insured retentions increased. Dr Hinsch says a reduction of some €130m in gross loss burden was directly attributable to the re-underwriting exercise. "This was not just luck but a consequence of our reunderwriting exercise", he says. Third, due to a conservative initial reserving policy, HDI has posted a reserve release for the past 30 years. The release in 2016 was lower than average but investment income was up. This helped boost the return on investment ratio and operating result.
HDI Global's decent results were in stark contrast to some other leading international insurers that were forced to report significant losses because of major reserve additions. Mr Hinsch was asked how HDI Global managed to deliver a result that was not hampered by such problems. "If you look at these reserve additions posted by some competitors, this is for business written years ago. Some companies apparently did not set reserves in the appropriate way at the time for their liability business. Liability business is an important part of our book, roughly equal to property, so we know how important it is to reserve properly. Maybe some peers showed better results in past years than they should have done. Another possible explanation is that perhaps they were aggressively growing at insufficient prices. If you do not set your IBNR (incurred but not reported) numbers adequately when you are strongly growing your book, especially in a soft market, then you will have a problem in future years", comments Dr Hinsch.
The more difficult thing is to hold a firm line in a competitive market while, at the same time, protecting your best business. It is fair to say that HDI Global was subject to a great deal of criticism from risk managers and brokers when announcing its re-underwriting strategy in Germany back in 2015. But Dr Hinsch says that ultimately, the market had to accept the sense and consistency behind its approach. "I am happy that we have the experts needed to apply an individual account-by-account approach, and so in the renewals of 2015 and 2016 we hardly lost any business that we wanted to retain. We did not have to use a simple ten-per cent-more-on-every-account approach. It helps of course if you are lead carrier as we are, because you have more to offer than just the lowest prices, namely quality service. If you are a follower in this market, the broker can quite easily replace you", explains Dr Hinsch.