NEWS
No nat cat white flag at Munich Re, which has resources to manage the risk
The complexities of writing property-cat business have forced many carriers to walk away.
A key theme of the Rendez-Vous so far has been a lack of new investors into the industry—despite favourable hard market conditions. Munich Re suggests there are several reasons for this—but one is simply that risks are so much more complex now, certainly on property-cat.
“We have seen player after player in the industry who has, I would say, raised a white flag,” board member Stefan Golling told a briefing at Monte Carlo. “Some even completely left the property reinsurance business.”
A new world of risk is placing ever-higher demands on even the best of the incumbent major underwriters for continually improved investment in data, analytics, broad market diversification and top-notch underwriting.
This makes it a tough prospect for those potentially starting from scratch—and also less well-resourced incumbent players.
“I can understand shying away if you don’t have the resources, the capabilities or the ambition to invest in your underwriting,” Golling said.
The bar is higher for incumbents and entrants alike. Munich Re is joining the chorus in claiming that the 2024 world of challenges may be unprecedented. And, under every challenge, there is the threat of a whole new field of uncharted aggregations.
“We need to think about the accumulation possibilities.”
Stefan Golling, Munich Re
Property-catastrophe is caught in the jaws of its two parts: the demographic and wealth level changes driving property on one hand, and climate change driving catastrophe on the other. “The challenge is no longer just in the peak perils, but in an ever-longer roster of secondary perils. Reinsurers invest in data, and high-definition modelling intensity and granularity—or they join the departers,” he said.
Nat cat years at $100 billion in insured losses is clearly a “new normal” and the string of convective storms in the US, wildfire and more that took the insurance world to a record first half and an early $50 billion mark are only highly redundant proof, Golling said.
Munich Re puts political risks high on the watch list. The war in Ukraine represents a systemic and high accumulation event. Strikes, riots and civil commotion risks also have the potential to turn what was a local issue into something of an accumulation risk.
“We need to think about the accumulation possibilities for those types of events as well.” Golling said.
Images, from top: Shutterstock / Melnikov Dmitriy