Munich Re US feels pressure on cat business

The world’s biggest reinsurer has admitted to feeling “real pressure” within the property- casualty space, as it remains cautious over the risks it takes on.

That is the opinion of Steven Levy, president, reinsurance division, Munich Reinsurance America. Describing the main challenges within the US market as the low interest rate environment and its balance sheet impact, excess capital, increased competition, and clients electing to increase retentions, Levy said that the reinsurer is adopting new and innovative ways to sustain growth.

“Munich Re’s property/casualty portfolio has a volume of around €17 billion ($21.7 billion); approximately €1.6 billion (~9 percent) of this is non-proportional natural catastrophe business. We are talking about a small part of our portfolio, but within this segment we are experiencing real pressure,” he said.

Levy added that as the reinsurers which have until now focused on the cat segment are seeking to diversify into other segments, other market developments, prices, terms and conditions for reinsurance cover have come under increasing pressure. This has also led to an increase in consolidation.

“Organic growth via underwriting and investment returns is difficult to come by in the current market environment. We are seeing some cedants tiering their reinsurers with consideration to both financial size and global reach.

“Reinsurers that can provide expansive geographic coverage, a broad array of product lines (ie, surety, property, casualty, specialty lines), and innovative solutions, can gain an advantage in this challenging market.

“Demand for risk transfer is becoming smarter and more challenging, and diversification and specialised risk expertise for complex tailored solutions are key,” he said.

For Munich Re, this innovation and continued striving for profit has seen the reinsurer make use of its global partnerships to satisfy clients’ needs.

“Munich Re is maintaining its clear, profit- oriented underwriting policy and accepts risk only with commensurate prices, terms and conditions. However, we also look at opportunities to offer innovative and tailored reinsurance solutions for clients where we combine our financial strength and significant capacity with expertise from all of our activities worldwide.

“These could be transactions offering solvency relief if the client needs capital at short notice, for example, or covers for new technologies,” Levy said.