Pricing in the January 1 reinsurance renewals is expected to be relatively flat, delegates at the Baden-Baden meeting have heard.

Negotiations continued in the German town last week as insurance and reinsurance industry representatives once again gathered to discuss prices.

Munich Re says it expects prices, terms and conditions will “largely remain stable”, with prices in the casualty classes set to stabilise with a trend towards slight increases, especially in the longer-tail categories where “low interest rates are squeezing future profitability”.

“The sustained low interest rates will increasingly test our industry’s still-strong capital base,” Munich Re board of management member Ludger Arnoldussen said.

“We will be broaching the issues of the interest rate level and the inflation of bodily injury claims in our negotiations. It remains our guiding principle to ensure terms and conditions are commensurate with the risk.”

Swiss Re CEO Michel Lies says adequate pricing is increasingly challenging in the low-interest rate environment.

He told delegates reinsurers must not shy away from hard risks, noting there are growth opportunities in an industry that covered only one-third of global natural catastrophe economic losses last year.

“Things are getting more extreme, more ugly and more volatile,” Mr Lies said. “Volatility is a fact and, as reinsurers, it is an opportunity to help our clients absorb risk, and we need to be louder about our role.”

He says volatility comes from natural catastrophe losses and shocks to the financial system. “We have to accept the fact there is increasing volatility on both sides of the balance sheet in the past 10 to 20 years.”