Reinsurance giant Munich Re is anticipating a tepid rate environment at the mid-year 2018 reinsurance renewals, but is targeting further growth into the United States market, where its share remains below its global average.
Like many other firms Munich Re’s expectations for the mid-year June 1 and July 1 reinsurance renewals has been dampened by the first-half renewal experience, where rate increases have been lower than had been hoped for and this is expected to be the case at the mid-point of the year as well.
Analysts from J.P. Morgan Cazenove met with senior Munich Re management yesterday, including the head of non-life reinsurance, to discuss the reinsurers outlook and certain key initiatives at the firm.
For the mid-year renewals Munich Re is not as gloomy as some have been, by expecting a subdued renewal at July, with an expectation that loss affected accounts could see rate rises of up to 10% to 12%, while non-loss affected accounts may be slightly up.
That is better than the flat reinsurance renewals that most are predicting for the non-loss affected accounts.
Munich Re puts the reason rates are not rising as much as had been hoped down to the continued competition from alternative capital, with that market having successfully replenished its capital after the losses of 2017 and not experienced any manager withdrawals from the market.
The analysts reported that Munich Re is going to seek to grow its position in the U.S. market, as the reinsurer confirmed to them that this would be an area of expansion for the firm.
The analysts estimate that Munich Re has a roughly 10% market share in U.S. reinsurance, lower than its more typical 13% market share around the globe.
Munich Re told the analysts that it does not have any inorganic growth options lined up, but said it continues to monitor opportunities, which suggests that at the moment growth is likely to come from increased shares and participation in renewals, despite the tepid price environment.
For major global reinsurers with a diversified platform, like Munich Re, even though rates are not rising as they would have liked after the major losses of 2017, their capital efficiency still allows them to compete and consider even growing into the U.S. market.
We’ve seen a number of major reinsurers grow their U.S. property catastrophe books this year, despite the rate environment, as they seek to benefit from any increase in pricing and build a larger position in the market that still often provides the best overall underwriting returns.
