Analysts at Munich Re have projected that the reinsurance sector will grow by 2-3% worldwide from 2022 to 2024, despite the numerous headwinds facing the market.
Alongside the 2022 RVS event in Monte Carlo this week, Munich Re flagged extreme inflation, rising interest rates and asset slumps as challenges for the entire re/insurance industry, alongside burdens from the war in Ukraine.
At the same time, lower reinsurance capital is expected this year, and European reinsurers are contending with the additional issues posed by a sharp rise in the US dollar against the Euro.
And the market for alternative risk transfer also shows no growth as the volume of capital invested remained roughly unchanged at around $100bn
The result of this will be short-term capacity shortages in some reinsurance segments, Munich Re warns, with a number of reinsurers having already reduced capacity for covers such as natural catastrophe in Florida, or even withdrawn entirely.
Yet at the same time, the company maintains that demand for reinsurance is on the rise, which it says should enable the global property-casualty reinsurance market will grow at least as strongly as the primary insurance market until 2024.
Munich Re’s Economic Research Department therefore estimates reinsurance sector growth of up to 3% over the next two years, led by Latin America where growth projections are at the 4-5% level.
This remains below the estimated growth rate of 6% for the overall reinsurance sector from 2019 to 2021, but it is at least at pace with the projected primary sector growth predictions of 2% to 2024.
Amid this environment, Munich Re’s management confirmed at a recent RVS press briefing that they have no ambition to shrink the company’s capacity on offer at the upcoming January 2022 renewals.
“We are remaining disciplined, but seize opportunities as they arise,” said Torsten Jeworrek, Member of the Board of Management. “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,” he added. “All in all, we remain firmly on track to meet our Ambition 2025 strategy targets.”