Munich Re: despite the macroeconomic challenges and the impact of climate change, the company remains firmly on track to meet its 2025 strategy targets

13 September 2022 — Marina MAGNAVAL
Munich Re's Economic Research Department estimates that the reinsurance sector will grow by 2-3% worldwide from 2022 to 2024, when adjusted for inflation with the strongest growth likely to be in Latin America, at 4-5%, as the company's recent press-release said.

Extreme inflation, rising interest rates and asset slumps are creating challenges for the entire insurance industry along with the war in Ukraine. For the first time since 2018, lower reinsurance capital is projected for the current year an important indicator for available reinsurance capacity and the decline anticipated is substantial: by over 8% to US 435bn, according to data released by AM Best and Guy Carpenter, the press release said.

Some reinsurers have reduced capacity in certain areas or have withdrawn entirely. And even the market for alternative risk transfer has not grown. Yet at the same time, demand is on the rise; the bottom line being that the global property-casualty reinsurance market will grow at least as strongly as the primary insurance market until 2024.

"We are remaining disciplined but seize opportunities as they arise. In doing so, we take great care to factor in inflation with due caution. Given appropriate conditions, we continue to support our clients with our financial strength and capacity. Where risks have heightened, such as in cyber or as a result of climate change, we need sufficient margins in our underwriting. 2022's renewal rounds so far have taken appropriate account of our prudent consideration of inflation changes, and rising interest rates will have a positive effect on our return on investment in the medium term. All in all, we remain firmly on track to meet our Ambition 2025 strategy targets", said Torsten Jeworrek, Member of the Board of Management.

Weather-related natural catastrophes such as heatwaves, droughts, wildfires or floods in many parts of the world have recently made it apparent that climate change is humankind's greatest challenge in the long term. "The impact of climate change is evident and has been proven many times over. Insurers also have to gear their risk management to this reality. For example, we are cultivating new high-resolution risk models for regional events such as flash flooding. Given the losses incurred, it is necessary to develop a deeper understanding of these events now in order to be able to take better precautions. In addition, a combination of greater prevention and a higher level of coverage through insurance is important, with risk-commensurate prices being the prerequisite", said Thomas Blunck, a member of the Munich Re's Board of Management, responsible for the Europe/Latin America Division.

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