Reinsurers face tough market; seek new opportunities for organic growth
The market remains tough for reinsurers, with rate increases well below what was forecast 12 months ago as an abundance of capacity maintains pressure on the market, Paul Ludwig, senior vice president and client executive of the reinsurance division of Munich Re America, told PCI Today.
Ludwig said that while there is a definite momentum towards increases it is nowhere near the level Munich Re would like to see.
“I’d characterise the market overall as tough at the moment,” he said. “Rates are moving in a positive direction, but maybe not as much as we’d like. There’s a lot of capacity, particularly on the property side, so despite the losses that we’ve had earlier in the year and last year, there’s momentum in an upward direction, but again probably not as strongly as we would like.”
Ludwig pointed out that there’s a lot of competition in the market, with some carriers and reinsurers diversifying away from property into casualty. The consequence of this has been that rates in this sector have also been subjected to some softening.
He added that in his view of rates, in some cases, such as commercial liability quota share, the commission levels are not commensurate with the loss experience the market is expecting.
As a result, Munich Re is cautious on lines such as commercial liability, particularly as there’s a lot of uncertainty about claims trends and where that’s taking the industry overall on the primary level.
“Overall there are no really bright spots at the moment,” Ludwig said. “Rates are moving, but again, not as quickly as we would like. It’s tough on the traditional reinsurance side at the moment.”
However, he pointed out that on the non-traditional side Munich Re continues to partner with clients and new types of companies in the insurtech space to try and bring new models to bear and also new products.
He describes this as one bright spot, albeit one that he does not think moves the needle in terms of premium volume or profitability, because it’s more of a long-term organic play for companies.
“As an example, Munich Re has been bringing to market a private flood programme on the personal lines side as well as the commercial lines side,” he explained.
“Basically through endorsements to existing policies we will cover flood in the US, which has very low take-up rates on the private side.
“This is inland flood, small dollars, it’s an add-on, but it’s a coverage that people are becoming more aware of the need for.”
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