Although reinsurance capital has partially recovered, rising to $461bn this year after declining to $434bn in 2022, the level of global capacity was not enough to shift underwriting conditions.
“The main message that I would deduce is we don’t have a massive capital inflow and that means the market dynamics are not changing,” said Munich Re’s CEO of reinsurance Thomas Blunck, speaking at the firm’s Monte Carlo Rendez-Vous press event.
The reinsurer was vocal on trends in the cyber market, where it has taken a standout stance around cyber war coverage.
Head of global clients and North America Stefan Golling said the cyber market would be “dead” if it did not control its accumulations.
“If we overexpose our overall balance sheets then I think the cyber market is dead before it has even achieved a meaningful size,” he said.
Golling said Munich Re was prepared to give up business rather than expose itself to accumulations which it viewed as unsustainable.
“If that means that we have to give up business to avoid that uncontrollable exposure, then no doubt we are prepared to give up business,” Golling said.
Quizzed on the trajectory of cyber pricing, he said the cyber market “needs to be careful not to become complacent”, and that Munich Re would use its dominant stance in the line of business to push for ongoing rating discipline.
More broadly, executives from the German reinsurer said there was little prospect of reinsurers giving up ground on improved conditions that have been achieved.
Inflation is expected to be a dominant factor in renewal discussions, with it remaining “particularly important” for carriers for reinsurers to be accurate in their inflation assumptions.
In addition, the reinsurer will continue to monitor closely the impact of secondary perils claims on climate risk performance.
Blunck said secondary perils accounted for 80% of nat cat losses in H1 2023.
Golling noted that the market dynamics meant “underwriting matters again”.
The executive said there was a “focus on the basics” as carriers looked to monitor accumulations and exposures.
Following years of high cat claims, Golling said an $100bn insured loss year for nat cat was the “new normal”.
“It would be naïve to hope that the last few years have been exceptions,” he said.
Social inflation was also repeatedly raised as an issue for the casualty market, especially in the US.
Golling said social inflation was “too friendly” a term and should instead be considered “legal system abuse”.
“This poses a huge challenge for long-tail liability covers,” he said.
