Munich Re is investing in technology and actively preparing and searching for growth opportunities to revert the current shrinking process.
“Munich Re believes that it can grow through product innovation, through risk solutions as well as traditional reinsurance,” said CEO Nikolaus Von Bomhard at the company’s 2016 full year press conference.
“The reinsurance part of the business depends on the market situation, he admits. However, “there is enough untapped insurance potential, not only in emerging markets but also in developed markets.”
For 2017, Munich Re said it is aiming for a consolidated result of between €2 billion and €2.4 billion in 2017, less than the €2.6 billion profit it made in 2016. The company is under pressure both from a soft market and, on the investment side, from a historically low interest rate environment.
In 2016, gross premiums written shrank to €48.9 billion from €50.4 billion in the previous year, as it shed business that did not meet the company’s margins expectations particularly in China. Munich Re prepares to shrink some more in the short term, Von Bomhard notes.
But the German reinsurer sees significant potential for example in the privatisation of flood risks in Europe and the US. In order to participate in this business opportunity, Munich Re is refining its flood modelling expertise. Also, a recently received approval for a branch in India is expected to generate new business.
In addition, Munich Re has high hopes for its innovation initiatives focusing on investments in IT and data analytics, which is set to boost the company’s revenues from services.
“This allows us to deal with large datasets and advanced analytical methods to dive into the datasets of re/insurers and detect patterns in customer behaviour in order to create new products,” said Torsten Jeworrek, executive board member responsible for reinsurance.
The technology is to be applied by Munich Re in its reinsurance operations to support medium-sized primary insurers which could not shoulder such an investment on their own.
To support its endeavour, Munich Re has also implemented an IT system which is more agile than standard, large software systems and allows to work on prototypes and fast-track product implementation to test them on the market and make adaptations quicker, Jeworrek said.
The goal is to deliver products that respond to new risks such as cyber but also business interruption without tangible damage. Munich Re also expects the initiatives to deliver new business models based for example on Internet of Things, Jeworrek noted. New market potential is developing for example in the shared economy and through data mining and Munich Re aims at developing risk services which will result in a fee based platform for insurers, Jeworrek says.
In order to grow, Munich Re is cooperating with insurtech companies. Overall, innovation-related business is currently generating a premium volume of €650 million, according to the company’s 2017 balance sheet presentation.
This story is just a snapshot on a longer article on Munich Re’s growth strategy. To find out more about its plan to boost its reinsurance capabilities and enhance growth, please click here.
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Munich Re, Nikolaus Von Bomhard,Torsten Jeworrek, Europe, North America, Insurance, Reinsurance