Munich Re has appetite for more nat cat, if price & terms remain appropriate

Global reinsurance giant Munich Re said this morning that it has additional capacity available for natural catastrophe risks, as long as the market remains disciplined and price as well as terms and conditions continue to be appropriate.

The comments from the major reinsurance player suggest the company is going to put price and T&C’s first, when selecting where to deploy nat cat capacity to.

In a briefing held in advance of the annual Baden-Baden reinsurance meeting in Germany, Munich Re highlighted the growing number of major catastrophe losses in Europe.

Clarisse Kopff, Member of the Board of Management, said that “it has been an increasing trend, an increase in frequency and an increase in severity.”

The reinsurer said there has been “an unprecedented series of natural catastrophe losses exceeding the 1-billion-euro mark this year.”

Which Munich Re says will be one of the factors “at the centre of the upcoming renewal discussions.”

Munich Re clearly sees an opportunity to respond and help insurers with additional capacity to absorb nat cat risks, but this won’t be at any cost.

“As leading provider in Europe, Munich Re is able to allocate additional capacities for natural catastrophes and other types of risks, provided that appropriate prices, terms and conditions can be achieved,” the reinsurance company said.

Adding, “Both delivering added value for clients and maintaining the quality of its own portfolio are top priorities in the renewals. To achieve this Munich Re will continue to pursue a policy of disciplined, technically sound underwriting, allowing it to make capacity commitments early in the renewal process and on the basis of clear criteria.”

Kopff said that Munich Re has adjusted its reinsurance terms and conditions in response to catastrophe loss trends, but is also expanding its model to cover more of the secondary and weather perils.

“We have our scale and diversification, so we can remain a substantial and predictable player,” Kopff said on nat cat risks.

“We still have appetite, provided we can get the proper prices.”

Munich Re is “ready to offer high capacity” for nat cat risks and believes the upwards trend in losses in manageable, through disciplined underwriitng.

Also, Kopff said, “we’re not dependent on retrocession,” explaining that Munich Re’s clients can rely on predictable capacity just when they need it and the reinsurer can offer capital well in advance of the renewals, as it does not need to wait for any third-parties to come into line.

“Natural catastrophes have always been at the core of Munich Re’s business. When top capacities are called for, we are a stable and dependable provider. We can see that, given the challenges posed by climate change and its growing economic impacts, there is a lasting demand for our core competences on the market,” Kopff said.

Kopff of Munich Re also said that the European incremental demand for nat cat is expected to be around EUR 5 billion, which is the same figure cited by Swiss Re this week.

Kopff went on to say that Munich Re is not expecting any significant inflows of capital to the reinsurance space, either traditional or alternative.

These comments suggest major reinsurers will be working hard to maintain price and terms, which could flow across the market and drive a stable renewal environment, especially if inflows of capital are not significant around the 1/1 renewal season.