Stefan Golling, Member of the Board of Management of global reinsurer Munich Re, has underlined the importance of underwriting and focusing on the basics after a number of years of weak results in the primary insurance and traditional reinsurance market.
Addressing an audience this afternoon at the annual meeting of the reinsurance industry in Monte Carlo, Golling said that one key driver that has changed the market over the past 24 months or so is that “underwriting matters again.”
“So, we had a number of years with rather weak underwriting results in the primary insurance market, but it was especially within the reinsurance market. We had disappointing returns on equity. We had surprised losses in the market, and we also had discussions about wording ambiguity and so on,” said Golling.
“So, for many years, maybe the focus in the industry was on innovation, on disruption, on digital capabilities, on distribution, and they are all important topics, and they will stay important and in the focus in the future as well. But, there’s also again a focus on the basics. And the basics, from my point of view, is the art of underwriting,” he added.
Golling went on to say that both underwriting capabilities and discipline are key, and that while rates are important, it is only one ingredient.
“Therefore, I said not rates matter, but underwriting matters. So underwriting discipline, underwriting expertise, that makes the difference, and that is much more than the price. It is the scope of coverage. It’s the alignment of interests. It’s having the right structures in place, and so on,” he said.
After some challenging years in terms of profitability, reinsurers have performed better in 2023 on the back of higher rates and some structural changes mainly focused on moving away from frequency losses, which has seen primary insurers absorb more losses from secondary perils than in the past.
Analysts have said that they expect the changes to terms and conditions and higher attachment points to stay, and while primary insurers will be hopeful of securing coverage at more manageable prices than seen at the Jan 2023 renewals, in 2024, reinsurers are expected to remain disciplined and not repeat the mistakes of the past.
