Munich Re signals ‘too many good opportunities’ at 1.1 as demand rises $5bn+

Primary insurers are likely seeking an additional $5 billion or more in additional reinsurance during the coming 1.1 renewal season as they chase the impact of inflation on insured values, a key official at  Munich Re in the US has stated.

“We expect more insurers to re-evaluate their purchases this fall, adjusting again upwards to take care of insured values” where inflation has done its worst, the head of business development at Munich Re US, Kerri Hamm, said in a podcast with CEO Marcus Winter.

“We estimate going into fall there will be at least as much additional cat capacity need as we saw in the spring and probably even more,” she said, citing reports the industry had bought “roughly $5 billion” additional capacity at the spring renewal season.

The supply side of the market would be stretched to accommodate, Hamm claimed.

Traditional capacity “has definitely retracted” amid reports of reinsurers rebalancing portfolios to avoid earnings volatility, she noted. Non-traditional capacity is harder to follow, but market measures suggest it “seems to have retracted” as well.

“Pricing multiples and spreads on cat bonds have increased significantly in the first half of 2022, indicating a lack of supply in the cat bond and possible ILS area as well,” Ghamm said.

The upshot: some quality primaries may walk away unsatiated.

“I would love to quadruple our nat cat budgets,” Hamm told listeners. “As our clients recognise the need to increase their placements in response to increasing values, there will actually be too many good opportunities with high quality clients and brokers.”

“It will only be inevitable that we will have to turn away some deals or not be able to extend further on others.”

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