Munich Re able to absorb elevated hurricane risks: analysts

Munich Re may be best placed to face the elevated chances for an above-normal hurricane season in 2022 given its standard practice of hiding iron-clad in the middle of the storm, one key equity brokerage is telling investment clients.

"While  Munich Re typically takes the greatest share of hurricane losses among the reinsurers, its balance sheet is arguably the best placed to withstand worst-case scenarios," analysts at the Berenberg brokerage said in its annual Hurricane Handbook.

On average,  Munich Re has taken ca. 3.4% of total industry losses per large loss from major Atlantic events over the past fifteen years. That's ahead of ca. 2.6% for Siws Re, 1.1% for Hannover Re and 0.6% for SCOR. PMLs show that  Munich Re has the highest exposure to Atlantic hurricanes, the 1-in-200 analyses show.

But  Munich Re is built to withstand the exposure, with a higher solvency surplus vis-a-vis management view to minimum optimum levels, the point at which Berenberg assumes management would unquestionably share losses more directly with shareholders.

Lower exposures for SCOR does spell lower sensitivity as a percentage of excess capital at risk. But as a nominal sum, SCOR just doesn't have the cushion at $2.6 billion to feel secure after staving off any major event.

Swiss Re has the greatest sensitivity to major events measured as percentage of surplus capital at risk in a major event. A worst-case scenario at Swiss Re's standard market share could wipe out half. Swiss Re loses a higher percentage of its surplus at its traditional market share than its three European rivals at any size disaster, comparative data indicated.

Berenberg built its model on capital surplus only, admitting to distortion from varied use of retrocession and ILS. Hannover Re gets called out for arguably the most adept use of retrocession structures known to have "significantly reduced the net impact of nat cat losses over the years."

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