Munich Re expects more European price increases at 1.1 on major losses and inflation
Munich Re anticipates continued hardening in the European market at the January renewal, citing recent major losses and rising inflation as drivers.
In a report launched at the annual Baden Baden reinsurance conference, the carrier said it expected demand for insurance and reinsurance to hold up through 2021-23, predicting global primary and reinsurance premiums would grow by 3%.
At the same time, Munich Re said that, although the rise in inflation in major economies this year due to strong demand and limited supply would ease off, it expects inflation to remain close to central bank models of 2% over the next few years.
It added that interest rates have remained virtually unchanged since before the pandemic.
“Taken together, these two factors are producing an upward pressure when it comes to insurance prices,” the carrier said.
Upwards pressure on pricing will also come from heightened European major losses this year, namely the floods that hit central Europe in mid-July, Munich Re said.
The carrier estimated the insured losses from the floods at EUR9bn ($10.4bn), out of EUR46bn economic losses. In Germany, the flooding created around EUR7bn of insured losses and economic losses of EUR33bn, it said.
“The influence of climate change, which makes precisely this type of regional extreme rainfall more probable, has to be taken into greater account in risk assessments,” Munich Re said.
Further, the carrier identified cyber attacks as “the number one” economic risk, adding that 81% of C-suite executives responding to a recent survey it conducted felt their company was not adequately protected against cyber risk.
Munich Re added that European cyber losses accounted for 10% of all global cyber losses in 2017 but predicted this would rise to 24% by 2025.
While Munich Re said it plans to increase the amount of cyber business it writes – in contrast to other carriers slashing their cyber exposure – it added: “Selective underwriting is key.”
Doris Höpke, member of the board of management at Munich Re, said: “We want to be the central partner for comprehensive risk management, to be a resilience provider.
“The basis for insurance, and for risk management of any type, is to monitor and understand risks, and to subsequently develop forward-thinking solutions that can strengthen society in the long term.
“We want to help reduce the considerable gaps in insurance that can still be found in many industrialised countries, like insurance for flood losses in Germany.
“Otherwise, many people will have no way to cover their losses, or will have to hope they receive state support, even though these losses could have been insured in exchange for a suitable premium.”