Munich Re won’t target renewals growth, but likes market’s discipline

Munich Re won’t target growth levels at treaty renewals, but believes that reinsurer discipline is holding up well to date in the hard market and growth is arguably chiefly limited by cedant reticence amid the market’s new higher prices. 

“I’m happy we don’t see too high a growth rate at the expense of margin,” CEO Joachim Wenning told his company’s FY2023 earnings call of broad market behaviour. A burst of reinsurance capacity could spell the opening of a softening cycle but “this hasn’t happened”. 

The more probable - and more acceptable - cap on growth is likely being placed by reinsurance buyers, Wenning said. Cedants have responded to hardened prices with higher attachment points and greater risk retention. 

“That means that growth is a little bit lower, but it is at very attractive rates and conditions,” he said. 

Wenning was called on to defend his own company’s 3.5% volume growth at the 1.1.2024 renewals, a gain boosted by only fractional top-line price growth of 0.3%. Those figures paled in comparison to figures declared by rivals, as they had in 2023.

“We are totally, totally and only bottom-line focused,” Wenning said of his company’s policy of writing business above the hurdle rate first, then counting up the tally later. 

“Our 3.5% is the outcome of what we could find in the market given our risk appetite, which is fine,” Wenning said.  “We accept what the outcome is,” he said of what he called Munich Re’s standard operating procedure for renewals. 

In its earnings release issued pre-session, management had called its 1.1 result “another good renewal in an ongoing attractive market environment” and focused its pricing commentary on saying that prior year gains had been “fully preserved”. 

Management claimed to be similarly “optimistic about April and July renewals” where its nat cat load is greater.

At the 1.1 renewals, Munich Re claims to have walked away from 8.5% of the book it had up for renewal, before recouping those sums and more on the business it did renew. 

Modest price growth was attributed in part to the group's “conservative” inflation and loss-trend assumptions, including nat cat modelling, management said.

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