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Have to be “determined” to let business go: Munich Re CEO

21st March 2017 - Author: Luke Gallin

There’s ample opportunity for insurers and reinsurers in emerging markets in both developed and developing countries, but it’s important to be able to walk away from business where the margin simply isn’t adequate in a softening landscape, according to outgoing Munich Re Chief Executive Officer (CEO), Nikolaus von Bomhard.

Munich Re logo on a signDuring the reinsurer’s recent earnings call CEO von Bomhard highlighted that the firm declined its business share by 5% at the January 2017 renewals, most of which was Chinese business. China is an emerging market that holds potential for the world’s insurers and reinsurers, but as discussed previously by reinsurancene.ws, a number of global reinsurers have pulled back on underwriting in the region, as regulation and the local reinsurance environment has increased competition for foreign players.

von Bomhard said that in emerging markets across the world “there’s a lot of room for us still do things,” drawing on the ability of digitalisation and innovation to facilitate expansion and growth of insurance and reinsurance across emerging markets, in both developed and developing regions. However, the question, says von Bomhard, is if the margin is right.

“Instead of trying to churn and have business churned around in the market and getting it next time or the second time, first you lose it then you get it back, and each time the margin is a little less,” said von Bomhard.

Continuing to say that for Munich Re this isn’t the correct approach, and that the reinsurer would rather let business go. “But you have to be determined to let business go,” stressed von Bomhard.

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Throughout the softening reinsurance market cycle, which is expected to be less pronounced in the future owing to the influx of efficient and competitive alternative reinsurance capital, the need for discipline has become more and more essential in navigating the market.

Munich Re recently announced a more conservative profit guidance for 2017 in anticipation of continued market softening, and the ability to walk away from business that is simply priced too low, is a sign of further discipline from the reinsurer.

Obviously the scale and size of Munich Re and other larger players, when compared with smaller reinsurers, enables firms to walk away from business perhaps more freely, but as the softening persists, which is expected throughout 2017 absent a truly market turning event, it will be intersting see just how disciplined and conservative reinsurers are able to be.

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