Munich Re shifts focus in favour of large, bespoke deals

Munich Re will continue to reduce its participation or walk away completely from transactional reinsurance business that it regards as under-priced in favour of doing bigger, bespoke, individual deals with clients—an area where it has enjoyed growth in recent years, Ludger Arnoldussen, member of the management board at Munich Re with responsibility for Germany, Asia Pacific and Africa Division, told Baden-Baden Today.

He said that while rate reductions in the market have slowed this year, the market remains difficult. In such an environment, he said, Munich Re exercises diligent cycle management, which means seeking risk-adequate prices or it contemplates reducing or stepping away from business.

In stark contrast to what remains a very competitive market in terms of traditional, transactional business, Munich Re is doing a lot more large, unique deals with clients, on which it acts as much as a capital provider to its clients as a reinsurer. On these deals, the pricing is better, Arnoldussen said.

He said that as proportions of renewing business, 60 percent represent more traditional, transactional-led reinsurance, and 40 percent these tailor-made, bespoke, deals. “The growth is coming from the bespoke side,” he said.

The company’s role for some clients is changing as a result. He cites one client who told him recently that they no longer see Munich Re as a reinsurer but instead as a capital provider.

While Solvency II has prompted more insurers to carefully consider their capital requirements and find more efficient ways of doing things, Arnoldussen stressed that this is also part of a wider trend whereby insurers have split the reinsurance market into tiers and want these deeper relationships with the bigger players.

“They are using us as a one-stop shop for multiple reasons and we are doing some big deals as a result,” he said.

While this has initially been driven by the bigger insurers, Arnoldussen said there remains a lot of potential in the market and Munich Re is having “intelligent discussions” with many of its clients around how it can assist them with multiple needs.

“We always try to be very close to our clients, whether the initial relationship is direct or via a broker,” he said. “That is how we operate but we are increasingly bringing multiple team members together to execute these big, one-off transactions.”

Arnoldussen also described how the reinsurer can help its clients in other ways. It has invested heavily in recent years in getting closer to emerging trends around the way technology may change the industry.

It has an office in Silicon Valley, for instance, which works with insuretech startups and invests in them where required. Its aim is to partner with them globally and ensure it sits at the cutting edge of new developments in the industry.

Arnoldussen said that as the use of technology and data analytics becomes more important, insurers that can also invest in leveraging these tools will gain a competitive advantage. Munich Re is able to use its own expertise and the results of its investments to help mid-sized or smaller clients unable to make a similar investment to compete.

“We have attracted a lot of talent in this area and not every company is able to do that. We can offer clients support where needed. We will always be looking to take risk—that is what we do—but we can become a type of risk-carrying consultant and offer an enhanced value proposition for our clients.”