As the market heads towards the important January 1st, 2023, reinsurance renewals, Christoph Jurecka, Chief Financial Officer (CFO) of German reinsurance company, Munich Re, is optimistic that further rate hardening will not be restricted to loss-impacted lines or regions.
The CFO and Member of the Board held an earnings call recently to discuss the reinsurer’s third-quarter and nine-month 2022 financial results.
Released early this morning, the results were positive for the large European reinsurer in spite of claims related to Hurricane Ian of €1.6 billion.
Starting with an overview of the firm’s performance so far in 2022, a Q&A session followed, during which Jurecka was questioned on the potential for widespread hardening at the upcoming renewals.
“I think it’s of course early and we approach the 1/1 renewal in a couple of months,” said Jurecka. “But I think there are clear indications that we are talking about a wider spread hard market, and this will not only affect selected lines or selected countries.”
The main reasons for this, he continued, are claims history, and also the alternative reinsurance capital space and what’s being seen in that market.
“So, I think we can be optimistic in that regard, but finally, of course, it is too early to tell,” he added.
Even prior to the 2022 wind season and the damage caused by Hurricane Ian, which looks set to be the second most costliest nat cat event in history for the re/insurance marketplace, it was expected that catastrophe-exposed lines would see some dramatic rate increases at the upcoming renewals.
Hurricane Ian has, unsurprisingly, exacerbated the situation and it is hard to see how rates for catastrophe exposed business in Florida, for example, fail to rise significantly. But given the recent claims history elsewhere around the world, and also the fact alternative capital is expected to be constrained heading into 2023, there’s greater impetus for wider market hardening.
While reinsurers are eager to get paid more for the nat cat risks they assume, driven by rising losses from secondary perils, the uncertain impacts of climate change, and the fact that 2022 looks certain to be another year of insured cat losses of more than $100 billion, the consensus appears to be that more rate is needed across the board.
Of course, only time will tell exactly what happens to rates outside of the loss-hit lines and regions, but commentary from reinsurers throughout Q3 reporting suggests that, as demand for cover rises, sellers of protection are for the most part unwilling to assume exposure at any price.
It’s going to be a very interesting January renewals, which reports claim will be very late as demand continues to rise while supply, in certain instances, continues to retract.
