While global reinsurance capacity is robust enough to cope with demand, there is “definitely not an excess of capital” in the market, according to Munich Re management board member Thomas Blunck.
Capital has increased slightly in the reinsurance and alternative risk transfer markets, but this rise is “more or less in line with the inflation we see”, the executive noted.
“Our core message is that our risk appetite, our strategy, our setup goes on,” he said. “No big changes, broadly speaking. Quite stable.”
The reinsurance sector’s return on equity, according to Aon, reached nearly 20% in 2023, but Blunck said that, after multiple loss-making years, one good year was too little.
“I don’t think that’s enough to be attractive in the capital market, to really find the interest of our shareholders,” he said.
He also argued that the industry should avoid relying on investment assets to perform strongly or “subsidise” underwriting results.
“It’s really the underwriting that has to perform very well in our core business,” he said.
Stefan Golling, another Munich Re management board member, noted that the reinsurance industry was “not at all in a super hard market, where you can simply accept blindly any kind of risk presented to you, or where you can simply aim for growth”.
He said the only area where Munich Re was cautious now was casualty, specifically US liability, which accounts for around 7% of its premiums.
Commenting on casualty-reserve movements this year, Golling said the industry had “clearly failed in assessing the claims and inflation trends properly”.
He argued that, with rates and limits, the industry tended to show “very strong action” when results were bad but then fell back into the habit of ignoring or underestimating exposure or claims strength.
That is not done by “aggressively pushing the rates down” but rather by “simply not keeping the rates up, in line with the exposure trend”, he said.
“We need to avoid that,” he added.
During July renewals, Munich Re reduced its proportion of casualty without motor by around 15%.
Golling said the company made this decision not because it had no concerns about its own casualty business or reserve level, but rather because it recognised the original rates or commissions were simply inadequate.
“We have no problem about either letting entire businesses go or at least to reduce our shares to manage the cycle adequately,” he said.
Cyber, on the other hand, is a segment where Munich Re took a strong position last year, particularly around cyber war exclusions.
A year on, Gulling said Munich Re had excluded cyber war entirely from its primary insurance and reinsurance books.
In the process, it had to give up some business, he added, but it is expecting to write $1.8bn in cyber premium by year end.
“With the insurance density in cyber still being very low, it will not surprise you that you also expect further growth in the market,” Gulling said.
“I would expect Munich Re to grow in cyber, in alignment with the market.”