Reinsurance hard market will probably sustain into 2025: Munich Re CEO

The CEO of one of the world’s largest reinsurance companies said today that he believes the current hard market conditions can sustain into 2025, as the sector faces numerous pressures still.

Munich Re CEO Joachim Wenning explained during an earnings call that “there is too much ongoing uncertainty” around the reinsurance market for the pressure on pricing to ease up considerably.

“In our eyes, the favourable market environment will not only sustain into 2024. But I’d like to make a bold statement, it will probably sustain into 2025 as well,” Wenning said.

Going on to explain, “We don’t have a crystal ball and I know that nobody can really know and predict this, and nobody knows what the actual large losses are going to be, how they impact the cycle, how the capital markets might or might not impact available capacities.

“However, besides those effects that always will be there, there is simply too much ongoing uncertainty around in the market and too much to still catch up, to worry about rates broadly decreasing.”

He highlighted other issues that are set to support reinsurance rates and pricing going forwards.

Saying that, “There is climate change and related losses, whether the big, large ones, or the more local ones.

“It’s obvious that losses practically have doubled in recent years and this trend will not become cheaper, if at all it will become more expensive.”

The other side of the equation is demand for reinsurance capacity and here Wenning sees growth prospects.

“Insurance gaps are still high even in established markets, to the extent that they will close this is further demand.

“The cyber market. there are not too many risk carriers offering that capacity,” he said.

While, at the same time, he expects inflationary effects to continue to provide support for hard market price levels as well.

“”Inflation is somehow lower, yes, but it’s still very much there. So, I also don’t see any easing of this. And social inflation driven by the US litigation industry, drives rates up and up, or coverages down,” he explained.

Before concluding, “I could add more points, but those define our position that we don’t see the positive trend changing any soon.”

Later in the call, Wenning went on to point out that this doesn’t necessarily mean further price increases.

“To what extent can we push rate increases? First of all, in all humbleness, we alone we cannot push anything. Our market share is not important enough globally.

“But what we can observe and what we can say is that the reinsurance market, though offering broadly the capacity needed and demanded in the market, the reinsurance industry is very firm in what they are charging for it. So, for good money, you can get good capacity. For soft prices, you don’t.

“And I just wanted to underline, we don’t see that these circumstances are changing anytime soon. But I will not make any prediction into what that could mean in terms of risk-adjusted rates next year or in two years, I just expect it to stay very favourable,” the Munich Re CEO said.