Munich Re: Expect us to continue to love nat cat business

Munich Re has said it remains comfortable with its natural catastrophe exposures and that it will continue to offer capacity at upcoming renewals.

The world’s largest reinsurer, Munich Re reported large losses of €1.64bn during the first half of 2023, and was the only one of Europe’s big four reinsurers to see its major loss bill rise year on year.

But during its Monte Carlo media briefing, the reinsurer said it remains ready to offer capacity for nat cat business, having added cat capacity for Europe and Latin America at recent renewals.

“You can expect Munich Re to love nat cat,” Thomas Blunck, CEO of reinsurance, said. “Natural catastrophe has been our core business for decades and we have intended to show that, over time, it is also profitable.

“The question of the structure, how do we divide the risk-carrying function between insurance retention and reinsurance, is an important topic, especially after the past three quarters. For us as a reinsurer, we feel comfortable with the existing position that we have,” he said.

Blunck said rising losses from secondary perils – such as severe thunderstorms, floods and wildfires – have been particularly felt in Europe and the US in the first half of the year.

With circa 80 percent of Munich Re’s H1 insured loss estimate driven by secondary perils, Blunck explained that while this is partially owing to the impact of climate change on extreme weather patterns, it is also a result of inflationary pressures on the underlying exposure of a portfolio.

“Generally speaking, the macroeconomic environment is fragile. Deglobalisation, decarbonisation, geopolitical uncertainties, secondary perils, we all see on the rise,” said Blunck.

“Inflation prices the underlying exposure of the portfolios that we reinsure, and it is a decisive element in the loss estimates on the claims level. Therefore it's an important feature that we need to discuss with our clients during the renewals.”

Stefan Golling, who since 2021 has been a member of the carrier’s board of management responsible for global clients and North America, said rising nat cat losses have put underwriting practices back under the spotlight, with industry estimates for insured losses in the first half of 2023 converging at around ~$50bn.

And with the hurricane season far from over, he added that it seems likely that 2023 will see total insured losses once again top the $100bn threshold.

“It would be naive to hope that the last five years have been exceptions, and the world will be quieter with less losses in the future,” said Golling.

“We have seen players in the industry in the last 12-24 months who have raised the white flag. I can understand that, if you don't have the resources, capabilities or ambition to really invest into underwriting, data and models,” Golling said.

Golling said there is now a focus on “back to basics” underwriting after several years of weak results across the reinsurance market.

“For many years, the focus in the industry was on innovation, disruption, digital capabilities and distribution. They will stay important in the future – but there's also a focus on the basics, the art of underwriting. Underwriting matters again.”

Golling noted that rising nat cat losses have re-propelled underwriting practices into the spotlight, with industry estimates for insured losses in the first half of 2023 converging around ~$50bn.

And with the hurricane season far from over, he added that it seems entirely likely that 2023 will see total insured losses once again top the $100bn threshold.

“It would be naive to hope that the last five years have been exceptions, and the world will be quieter with less losses in the future,” said Golling.