German reinsurance giant Munich Re is reportedly looking to cut its costs, with an internal memo suggesting that an efficiency drive is underway at the reinsurer, including potential reductions in headcount.
With reinsurance companies needing to address expense ratios, while at the same time grappling with the promised streamlining of their businesses through digitalisation, there is no surprise that major global players would look to launch efficiency drives in 2018.
In fact the surprising fact is that it’s taken so long for news to emerge about a major reinsurer planning to lower its costs, but now that the realities of the January renewals and the fact that pricing did not rebound as had been hoped for, following the catastrophe losses, perhaps companies will be stimulated to address this issue more urgently.
According to a report first published by German insurance news publisher Versicherungsmonitor and then followed up by Reuters, but not confirmed by Munich Re yet (we have enquired), the company has published an interview with its CEO Joachim Wenning on the company intranet, where the desire to cut costs and staff is revealed.
Wenning is reported to say in the interview that the reinsurer recognises the need to reduce complexity, increase efficiency and that one of the ways it will achieve that is through job cuts.
It’s expected that job cuts will be seen in Germany, at the reinsurers headquarters, and also in the United States, according to the reports, with both retirement and also voluntary redundancy said to be options.
It’s important not to get carried away here. Munich Re has been modernising and transforming areas of the business for some years now, particularly in its digitalisation efforts and its primary unit Ergo.
Perhaps the program of efficiency has just moved onto the more core reinsurance areas of the business.
The reinsurance market has been undergoing a transformation of its own in recent years, with efficiency now absolutely vital and the market recognising that its expenses need to come down if it is to compete with alternative capital and new insurtech driven business models.
Perhaps Munich Re is now responding to these potential threats and seeking to transform its reinsurance business to a leaner platform, better positioned to capitalise on the market trends of the future.