NEWS
Munich Re can meet rising demand in nat cat & cyber, if the price fits
Munich Re sees a $5bn rise in reinsurance demand from European cedants for the 1/1 renewals.
Munich Re believes that rising demand from cedants in key lines, such as nat cat and cyber, along with a need to better manage more complex risks, could hit its sweet spots for underwriting and capacity in the coming renewal—and it is ready to lean into the demand with no requirement for external support.
That was one core message offered by senior executives at the reinsurer at a briefing ahead of Baden-Baden. “We see a world of uncertainty and complexity,” Clarisse Kopff, Munich Re board member for Europe and Latin America, told the pre-Baden-Baden briefing. “That’s certainly not bad for players who have a strong balance sheet and good underwriting capacity.”
Offering a bird’s-eye view of market conditions and forces influencing the market, she described inflation as “sticky” and highlighted continued “high nat cat activity”, as well as geopolitical and civil unrest and rising cyber threats. “All this is in the context of rather muted economic activity,” Kopff said.
Given all this, reinsurers may face increased demand from cedants. Munich Re anticipates a $5 billion increase in reinsurance demand from European cedants for the 1/1 renewal driven by rising nat cat exposures and inflation, she said.
But this could suit Munich Re, which said it is more than pleased to keep pace with the property-cat market and release ever more capacity into an increasingly risk-laden nat cat environment. It does not require third-party or retro back-up, it stressed, on the assumption prices and conditions continue to adjust favourably where required.
“We don’t need retro capacity to be active in this market.”
Clarisse Kopff, Munich Re
“We still have appetite provided we get the proper prices,” she said. “We don’t need retro capacity to be active in this market. We are not dependant on any other third party; we don’t have to wait for them.”
To Kopff’s eye, Munich Re has been “pretty accurate” in predicting the upward swing in nat cat and claims. “We think the upward trend is manageable,” she said.
The upshot, Munich Re said, is that its clients can expect “predictable and early” quotes in the 1/1 renewal process, a certainty that the reinsurer feels some peers failed to offer in the year prior. “We are consistent: there is no such thing as stop and go.”
This predictability is more than can be said for nat cat events. Kopff cites seven major nat cat events year to date in Europe, of which six were weather-driven. They include hail and flood and illustrate the growing importance of the so-called secondary perils.
To get ahead on this, Munich Re has extended its models framework to cover an increasing share of the secondary perils that dominate the European cat loss landscape. Work has been done on structures, prices and wordings and continues apace at a more granular level.
This rising nat cat activity and the lingering effects of inflation justify why Munich Re wants to talk rate increases. “A continuing supply-demand imbalance could mean we will get them,” Kopff suggested.
“There is still an imbalance between rather stable, slightly increasing, supply and demand which is increasing faster,” she told the briefing. “That means that the prices, structures and wordings are being discussed again”—albeit with room for differentiation among clients.
“The prices, structures and wordings are being discussed again.”
Other markets
Cyber is likewise a fast-growing market in which Munich Re is not afraid to lead the growth charge. Munich Re estimates over 30 percent compound annual growth to a $8 billion European market by 2027.
“We have grown our cyber book in recent years and intend to continue on that path. It is a profitable book, even if we factor in the possibility of a large accumulation loss,” said Claudia Hasse, Munich Re’s head of cyber for Europe and Latin America.
Geopolitics are also a concern for Munich Re. Rising civil unrest and risks of spillover tensions from events in the Middle East trigger talk of “stringent limit management” and tighter wordings.
“We need to be careful,” Kopff said. “It is fair to say that the more conflict we have out there, the closer we will look into conditions and pricing.”
US casualty, a big topic of conversation in the market more widely, was not mentioned by name in the briefing, but Munich Re may have already acted.
“We reduced our exposure in the US earlier, compared to the rest of the market,” Kopff explained. “In Europe, we were pretty conservative in writing new business” rendering only “moderate exposure” today. “We continue with that discipline,” she concluded.
Main image: Shutterstock / PHLD Luca