In his annual letter to shareholders, Munich Re’s Chairman of the Board, Joachim Wenning, outlined a positive forecast for the company’s future, despite the challenges of 2017, citing rising reinsurance prices and new market opportunities for profitable business as factors that will drive growth.
Wenning prefaced his outlook by acknowledging the unusual accumulation of large-scale catastrophe events in 2017, like the hurricanes in the U.S and the Caribbean, the California wildfires, and the earthquakes in Mexico, which he noted had “a severe impact on our result in the reinsurance field of business.”
Munich Re’s property and casualty (P&C) sector, which in normal years would generate most of the company’s profits, posted a loss last year due to these events, but Wenning observed that prices for renewed reinsurance business in 2018 have increased in response to 2017’s huge market losses.
He added that: “This positive development is likely to intensify later in the year when many other treaties come up for renewal in the markets affected by the catastrophes. We are confident that market conditions will continue to improve.”
Torsten Jeworrek, a member of Munich Re’s Board of Management, concurred with Wenning, asserting that: “Reinsurance prices increased at the January renewals, particularly in the markets affected by natural catastrophes. We expect this trend to continue in the renewal rounds yet to come.”
Munich Re paid out over €3 billion for catastrophe events in 2017, and although Wenning asserts that the company was “well positioned to absorb even such heavy losses”, he suggested that it will now look to grow its reinsurance profitability by seizing new business opportunities.
He said: “In some selected markets, we will increase our willingness to take on risk without compromising our underwriting principles. At the same time, we will vigorously pursue new markets in uninsured or under-insured risks.”
The Chairman pointed to the establishment of Munich Re’s partnership with the World Bank and the World Health Organization last year, which covers pandemic risk in developing countries, as an example of the company’s strategy in action.
A part of its annual review, Munich Re’s presentation also highlighted stability in traditional reinsurance capital and high levels of alternative capital as factors in the company’s positive outlook, in addition to the price increases and new market opportunities referred to by Wenning.