Munich Re willing to walk away from business after excluding cyber war from entire portfolio

Munich Re is willing to give up market share after excluding cyber war from its primary insurance and reinsurance books, according to management board member Stefan Golling.

Speaking at this year’s Monte Carlo Rendez-Vouz, Golling said Munich Re has maintained the hardline stance on cyber war witnessed at previous renewals.

He confirmed that the reinsurer has excluded cyber war entirely from both its primary insurance and reinsurance portfolios.

Golling explained: “If we need to give up the entire business, we are prepared to do so, because we simply think we cannot insure cyber war.

“It would be such a massive accumulation potential that not only the reinsurance industry, but also the primary insurance industry, could simply not survive if something really material happened.”

Munich Re’s total cyber gross written premiums are set to fall from $2.1bn in 2023 to an expected $1.8bn for 2024. This is the second year in a row in which Munich Re’s overall cyber premiums have fallen, with 2022 GWP having totalled $2.2bn for the class.

Speaking to The Insurer in Monte Carlo, Munich Re’s senior executive manager for the Lloyd’s and Bermuda markets Claudia Schwimmer noted that the loss of market share associated with cyber war exclusions was stabilising.

Sources said Munich Re’s slight drop in market share may also be related to an increased number of non-proportional products in the cyber market, while the German reinsurer prefers proportional cover.

Despite its drop in premiums, Munich Re remains the industry’s largest cyber underwriter, with its stance on cyber war part of its goal to create a sustainable market.

And Golling pointed towards CrowdStrike as an example of why it has attempted to create a “clear” approach to war wordings.

“Accumulation management, transparent coverage, as well as clearly defining the limitations of your own risk appetite and also of the coverage out there are absolutely important to continue making cyber a sustainable business,” he said.

There was initial confusion over what was covered in the wake of the CrowdStrike outage, with Ariel Re’s Dan Carr noting that discrepancies in coverage between primary insurers is a significant concern for reinsurers.

Growth expected to continue

Cyber growth remained high on the agenda for most of Europe’s largest reinsurers at this year’s Monte Carlo.

Munich Re’s Golling highlighted that insurance penetration in the cyber market remains low.

“With the insurance density in cyber still being very low, it will not surprise you that we also expect their further growth in the market, and I would expect Munich Re to grow in cyber,” he said.

Swiss Re’s P&C reinsurance CUO Gianfranco Lot agreed that cyber is a line of business that is expected to grow significantly over the next couple of years, estimating an annual growth rate in the “significant double digits”.

However, he said that in real terms this growth was nowhere near where it should be, with a temporary contraction in market premiums related to a push for profitability.

Scor CEO Thierry Léger agreed that a lack of capacity was limiting the market’s ability to take advantage of what he described as “limitless” opportunities given by cyber’s low insurance penetration.

Yet he still underlined his expectation that the market will be able to grow at 10-15 percent for the coming decades.

Hannover Re’s cautious appetite

Hannover Re positioned itself more cautiously, offering insight into the reasons why the cyber market has struggled to source adequate capital to match demand.

Cyber and digital business managing director Stefan Sperlich said: “I think as an industry, we have question marks around price adequacy on the primary side in the absence of large losses. CrowdStrike will not help us to test if price adequacy is at a level that it needs to be.”

Nonetheless, the Hannover Re cyber lead emphasised that the reinsurer maintained an appetite for general cyber.

“We have appetite, we have capacity to deploy, but we are cautious and will wait to see how certain features develop.”