Munich Re runs inflation-free; ongoing reserve review should be neutral

Munich Re continues to book claims largely free of inflation pressures in all lines outside of motor insurance and should make it through a year-end reserve review without major turbulence and into 2023 with a full pass through of inflation to clients, a top official has insisted.

“We do not see elevated inflation,” CFO Christoph Jurecka (Pictured) told his company’s Q3 investor call, making exception only for motor lines.  “The only area where we currently see it is in motor; in the other lines, we just don’t see anything yet.”

“It’s nothing to be worried about at this point in time.” Jurecka said.

Visibility comes with caveat for faster recognition of claims costs in the group’s primary insurance business versus the reinsurance segments where data arrives via cedants with a delay.

The annual review of reserve positions is underway, with an eye to rooting out signs of inflation in a move from initial assumptions to latest signals. The impact on earnings should prove “clearly manageable” if palpable at all.

Chances are very high that the review will simply end with a “reshuffling” of reserves from existing excess buffers into specific line-item reserves with no impact to the P&L, Jurecka indicated. Jurecka sees “no indication” that the current pace of reserve releases would be derailed.

“That’s why we say we don’t expect any major impact at year-end:  whatever we find on the inflation side we will be able to cover that from reserves we have elsewhere.”

Pricing should catch inflation risks from here on out. “Going forward, the assumption is that we can transfer …; completely into the price, into our clients, such that going forward there will be no negative impact from higher inflation.”

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