Munich Re continues to focus on ensuring appropriate risk management conditions in a challenging market environment characterised by volatile loss trends and increasingly complex risks.

Despite these challenges, the global reinsurance market is expected to grow by 2-3% over the next three years, after adjusting for inflation, closely in line with primary insurance market growth. This growth is expected to be strongest in Asia-Pacific and Latin America, while Europe and North America are expected to see slightly weaker expansion.

The macroeconomic environment has shown signs of stabilization, although significant geopolitical risks persist. Global economic growth is expected to average around 2.5% over the coming years, down from pre-pandemic levels. While inflation is declining in advanced economies, it is expected to remain above levels of the past decade.

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In some reinsurance sectors, claims inflation is outpacing broader economic trends. Factors such as rising damages in the United States, attributed to social inflation, rising health care costs, and shortages of building materials and labor, have led to significantly higher claims costs.

According to data from AM Best/Guy Carpenter, global reinsurance capital is expected to reach $515 billion in 2024, as expected. The alternative risk capital market has seen modest growth, although its overall impact on the reinsurance market remains limited. Demand for reinsurance capacity has remained strong, helping to stabilize the market at higher levels.

Thomas Blank (pictured above), a member of the Munich Re management board, stressed the need for adequate profitability in the reinsurance sector. He pointed out that the sector has failed to meet its capital costs in four of the past seven years, stressing the importance of achieving appropriate risk ratios to counter volatility and increased exposure, which in turn requires more risk capital.

Munich Re pays particular attention to developments in several key areas. Among these are natural catastrophes and climate change, where insured losses are on the rise. Total global insured losses from natural catastrophes now exceed USD 100 billion annually, driven by events such as hurricanes and earthquakes.

However, non-peak risks such as severe thunderstorms, hurricanes, floods and wildfires contribute to the overall increase in insured losses. Climate change is believed to play a role in the frequency and severity of these risks.

Munich Re said it is investing in developing new and improved risk models, while strengthening its global diversification to maintain long-term profitability in its natural catastrophe business.

victim under scrutiny

The accident compensation industry is also under scrutiny, particularly in the United States, where claims inflation continues to rise. Higher award rulings are becoming increasingly common, a trend that has benefited specialist lawyers and litigation funders. This dynamic contributes to what Munich Re describes as a “tort tax” of about $3,600 per American household per year.

The company’s analysis has shown that price developments have failed to keep pace with the inflation of claims in recent years. Munich Re intends to continue supporting clients who are aware of the impact of these rising costs and the challenges facing the legal system.

Cyber ​​risks are another area of ​​focus for Munich Re. As the global cyber insurance market continues to grow, the company is committed to providing significant capacity to meet this growing demand.

Munich Re plans to maintain its position on not covering uninsurable systemic risks, such as cyber warfare, and is investing in strengthening risk and accumulation models in the cyber insurance sector.

Read more: Climate losses put pressure on insurance companies

Plunk noted that while the reinsurance market has reached a reasonable equilibrium, uncertainty remains. Claims inflation remains high in many sectors, and broader economic risks remain challenging.

He added that Munich Re will continue to focus on achieving appropriate risk rates and conditions, using its financial strength and expertise to selectively expand its capabilities in areas that benefit clients.

Stefan Gülling, a member of the Management Board, expressed similar sentiments. He highlighted Munich Re’s role as a risk-taking company with significant financial resources and expertise in managing large and complex risks.

Juling noted that the company’s clients rely on Munich Re to leverage its strength and know-how to help mitigate claims volatility. He also noted that Munich Re will not hesitate to exit business lines that do not meet its technical standards to achieve sustainable profitability.

As the global risk landscape continues to evolve, Munich Re plans to continue to focus on delivering the expertise and capability its clients need, while maintaining a disciplined approach to underwriting and risk management.

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