Munich Re has no renewals growth targets, only renewals litmus tests

Munich Re can take new exposure or leave it in the pending reinsurance renewals, going client by client to see who bends to the new terms and who doesn’t rather than applying any macro growth targets, officials said at a media briefing ahead of the Baden Baden renewals soiree.

“We have the needed capacity and we can increase that capacity,” board member Thomas Blunck said. “We are willing to, but the terms and conditions have to reflect the circumstances and underlying trends.”

“Depending on terms and conditions, we may end up growing or we may end up with stable business volumes, and maybe, we even shrink in a couple of segments.”

Munich Re’s built its litmus test on a rather pessimistic outlook for European conditions. The economic outlook is “bleak,” the rise in inflation is “abrupt and jumpy and the geopolitical situation “fragile” with dangerous kick-on impacts for policy and the economy. Recession looks “quite imminent”

Closer to the industry home, supply-demand factors have tilted sharply: capacity has shrunk notably and alternative capacity appears trapped. Demand, in turn, has flown high on inflation and loss trend, officials argued.

The upshot:  rates, structures, retentions and terms & conditions are all up for review, they say in lockstep with fellow reinsurance industry leaders.

“The key priority is definitely pricing, reflecting the rising exposures in certain segments, reflecting the loss development,” Blunck said. But officials proceeded to shake off all questions of price targets, saying everything is individually client by client and depending on the approach to structure.

To grease a path to higher retentions, Munich Re will push separate structured finance products on cedents to help them mitigate the potential increase in earnings volatility, officials said. The product will be designed to spread out earnings impact over a 3Y or 5Y period but include only limited amounts of risk transfer, officials indicated.

Cross Munich Re’s bar and they’ll increase exposure “if everything comes together well,” Blunck said.  Ask for more exposure without bending on terms and the shoulder may prove colder. “Of course we wouldn’t if things are not according to our requirements.”

“We have to be conservative at these times as the downside risks seem to have a higher probability,” Blunck said.

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