Innovation is key amid competitive pressures: Munich Re
In the current market environment, which includes intense competition and the pressure to change, innovation is key, said Munich Re at its press conference at the Monte Carlo Rendez-Vous.
The competition among re/insurers has been characterised by low interest rates, high capitalisation of market participants and the impact of alternative capital, which has flooded into the market seeking better returns than are available elsewhere—because of low interest rates in the wider world.
“Insurance companies have understood where the price limits are and take advantage of the low premiums. That means not everything that comes into the market is necessarily attractive business,” said Torsten Jeworrek, board member at Munich Re.
Amid this competition, Jeworrek stressed the importance of innovation, particularly digitisation, for Munich Re and all reinsurers in the market.
“When we look at what is going on in digitisation, we see that completely new business models are being developed and that more data is available,” Jeworrek said.
“More data is becoming available on both customer behaviour and the performance of machines in the manufacturing process. We are convinced this has an impact on our business models,” he said.
He also suggested Munich Re’s value chain might look very different in a couple of years’ time, partly because the younger generation will be buying their insurance products in a very different way.
“We are convinced that the right response of a re/insurance company in such an environment is not to take a ‘wait and see’ position, but to invent a completely new business model,” he said.
Munich Re also discussed the growth prospects of the market, concluding that neither primary insurance nor reinsurance will grow significantly in the next three years.
For primary insurance, Munich Re expects annual growth of 3 percent, with emerging markets including the Asia-Pacific and Africa and Middle Eastern markets supporting this figure.
But in the mature markets, such as Europe and the US, Munich Re does not expect much growth in either primary insurance or reinsurance, the latter at only 1 percent.
Asia-Pacific has reported the highest level of expected growth in primary insurance in recent years at 6 percent, but its expected reinsurance growth was close to 0 percent.
This was largely because the reinsurer expects negative growth in the Asia-Pacific region because of reduced cession volumes in the Chinese markets influenced by volatile motor solvency relief deals in China.
