Swiss reinsurer and Munich Re subsidiary NewRe is “open to giving up business” at the January renewals depending on how pricing and structural negotiations play out over the next few months, according to CEO Thomas Braune.
Speaking to Reinsurance News at the RVS 2022 event in Monte Carlo last week, Braune said that he expects a “work-intense” renewal due to the significant uncertainties currently holding sway over the reinsurance market.
Braune highlighted that inflation and capacity had constituted the main talking points at the key Monaco conference, but noted that it remains unclear whether these challenges have yet been adequately priced into reinsurance coverage.
Against this backdrop, NewRe will be seeking continuity and transparency in the risks it takes on at 1/1, the CEO explained, but added that the company would also consider pulling back from business that doesn’t meet its standards.
“For NewRe it’s about reliability and also the trust that we can deliver,” Braune told Reinsurance News. “The more we have transparency and clarity about what is covered, the easier the renewal will be. And for us, uncertainty always has a price. The more uncertainty there is in what is covered, the higher the price is.”
“Obviously, if you talk about adequate prices, everybody agrees but maybe has a totally different opinion on what is adequate when it comes to concrete discussions,” he continued.
“The price must be adequate and there must be transparency on what we really cover. We don’t have the need to grow. And if the price is not adequate, we’re also open to giving up business.”
With so many uncertainties to be addressed during negotiations, Braune acknowledged that there is a risk that renewals will run this year, and urged the market to begin discussions promptly
“I hope that we enter negotiations as early as possible,” he said. “The next step is Baden-Baden when we will hopefully have more clarity, because I think it’s not wise for the industry to wait until the last moment.”
A key point in negotiations will be attachment points, Braune observed, as low attachment points are more claims exposed and the probability for claims is higher now due to inflation.
“The question is whether the whole program moves due to claims inflation, or if the clients have different risk appetites,” he told Reinsurance News. “If they stick to the relatively low attachment points, we need a different solution for the lower layers and therefore probably a restructuring.”
Nevertheless, Braune maintained that NewRe was also open to restructuring its programs if necessary, although it plans to remain more wary of changes in some lines than others.
“In Casualty we are more cautious,” he granted. “We have grown in Casualty quite a lot over the last few years, and now we see it’s time to consolidate. In Motor the margins are relatively low. And from my point of view, in times of uncertainty it’s not the time to grow business with low margins. And also in liability: we see signs that rates are easing. Again this is not really the time to grow this line of business.”
