‘There’s no reason for the cycle to turn’: Munich Re’s head of P&C Greater China

“Given the loss trends we see, there’s no reason for the cycle to turn.” Those are the words of Serene Chan, Munich Re’s new head of P&C Greater China, who wants the industry to take a different and a more proactive approach to tackling secondary perils, with the goal of achieving long-term sustainability.

Speaking to EAIC Today, Chan said the industry needs to remain vigilant as it faces an uncertain future, particularly with the typhoon season still unfolding. “We’re not at the end of the typhoon season yet. If more typhoons hit, then the market might potentially harden even further. But we’ll have to see,” she said. 

“Future risks are reshaping the market, and we need to address them now.”

• “Let’s not ignore the trends we’re seeing,” she reiterated. “We have to recognise that secondary perils are increasing, they have hit us—the entire insurance industry—hard.”

Chan’s insights align with the broader conversation taking place in the industry about how to manage these risks in the Asia-Pacific region, where natural catastrophe losses have been escalating for insurers. Secondary perils—smaller events such as storms, floods, and wildfires not traditionally modelled and priced for separately by the industry—have started to dominate the loss landscape.

“Secondary perils are the future,” Chan explained. “These future risks are reshaping the market, and we need to address them now.” Losses from secondary perils accounted for 68 percent of overall losses and 76 percent of total global insurance losses in the first half of this year alone, Chan said, citing a key finding from a Munich Re's report released in July titled “Severe thunderstorms and flooding drive natural disaster losses in the first half of 2024”.

Chan warned that this isn’t a short-term anomaly, but a clear indicator of the risks that lie ahead. 

“It’s not just about the reinsurance renewals,” she said. “We need to work with the original market to ensure they are pricing the risks correctly and delivering sustainable products.

“In Greater China we’ve seen some of the biggest typhoon losses in recent weeks, and the largest earthquake in Taiwan in years,” she noted. “No geography, no territory is immune from these events any more.” The frequency and severity of such disasters are driving the need for a more adaptive, resilient approach to underwriting and managing risk, she argued.

Given these trends, Chan sees no immediate reason for the reinsurance market to shift and certainly not soften. One year of profitability is promising, it’s not enough to turn the tide. “Globally, we see the market in a balance,” she said. “For one year, everyone is talking about how reinsurers are earning money. But that’s one year after many years in which the sector struggled to earn its cost of capital—in four out of seven years it couldn’t. 

“We need several more years of good business,” she asserted. “We don’t see any good reason, whether it’s in Asia-Pacific or globally, for the market to start turning already.”

Further opportunities 

More broadly Chan is optimistic about Munich Re’s growth prospects in the Asia-Pacific region. 

“We want to expand in Asia-Pacific. Our risk appetite is there,” she said noting that diversification will be a central part of the company’s global strategy. The region offers significant opportunities, particularly in the nat cat space, but growth will be measured and strategic. 

“We want to grow in the nat cat space, but it has to come with the right terms and conditions, and structures that are sustainable for the market,” Chan emphasised.

Zooming into the market that she oversees and closely monitors, Chan observed that regulators in Greater China are becoming increasingly focused on risk mitigation, ensuring that the primary insurance side is resilient enough to protect end consumers and enterprises. “We need to make sure we align with what the local market requires,” she said. 

Another significant area of growth, Chan suggests, is cyber. Prior to her appointment as head of P&C Greater China in April this year, Chan had led the growth of Munich Re’s cyber business in Asia-Pacific since 2018.

“I see huge growth in cyber,” she said. “If we look at China, the recent guidance and regulation point to a very targeted cyber insurance growth strategy, because they recognise that there is an inherent exposure in a digital economy such as China’s.

“There are not many countries where the regulator provides clear direction on cyber insurance, and that’s where we step in to support clients and ensure that more sustainable products are developed that meet the regulatory requirements,” she said. 

“We need to find solutions, not just start excluding everything.”

Innovation is another area of focus for Chan, and she sees significant potential for growth—where it is done correctly. For her, innovation is not just about developing new products; it’s about adapting existing ones to meet new challenges. “Innovation can be relative,” she says. “Is an electric vehicle motor insurance product innovation? I argue yes, because it’s a whole different risk landscape.

“We need innovative, suitable solutions that solve our clients’ requirements,” Chan said. This means addressing the entire value chain of emerging industries such as renewable energy, from construction to potential liabilities during operation, she added.

Insurance for new energy vehicles, connected cars, wind farms, and renewable energy are also innovative products. These industries present unique risks, and Munich Re is working to develop the expertise and data needed to support its clients, she said. 

“Green energy and connected cars come with very new risks. If we ignore these now, that’s a huge risk to the reinsurance industry,” Chan warned. “We need to find solutions, not just start excluding everything.”

“This region presents a lot of opportunity for Munich Re,” she concluded.

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