Munich Re launches global parametric risk transfer business unit

Munich Re, one of the largest reinsurance companies in the world, has launched a new global unit focused on growing its share in parametric natural catastrophe risk transfer solutions, bringing together expertise from across the business to target this growing area of the market.

Munich Re has been writing parametric solutions insurance and reinsurance business for over two decades, but is now formalising a global team and business unit to target growth of this business line.

Initially focused on natural catastrophe risks, Munich Re also sees the potential to harness its parametric risk solutions expertise for other lines of business as well.

The reinsurer notes that “the market for parametric solutions is highly dynamic and still gaining pace,” adding that these solutions are “providing post-catastrophe liquidity and coverage for otherwise uninsurable risks,” as a result of which it complements traditional insurance.

Munich Re’s core strategy is all about significant risk taking capacity, deep technical risk knowledge and risk modelling skills, significant data and a global footprint.

The company intends to bring all of these factors together, alongside the use of advanced technologies such as artificial intelligence (AI), internet of things (IoT) and remote sensing technologies, to develop customised parametric risk transfer solutions for clients.

Munich Re’s newly formed parametric solutions business unit will bring together expertise from across the reinsurance business and around the world, to continue collaborating the firm’s facultative and corporate client business, combining expertise and specialists in product development, catastrophe risk modelling, underwriting and structuring, with decades of experience.

The reinsurer also highlights its long-standing expertise, in not just parametric risk transfer, but also insurance-linked securitizations (ILS) and weather risk transfer.

Munich Re has been involved in a number of parametric ILS transactions over the years, such as parametric catastrophe bonds, both for its own protection as well as through its participation and assistance in transactions such as some facilitated by the World Bank.

The company notes that parametric risk transfer is an efficient product for covering business interruption and loss of income, enhancing the resilience of public bodies, corporations and financial institutions, both in low-income and highly developed countries, while also having been endorsed to support the achievement of key sustainable development goals.

August Pröbstl, Head of Capital Partners at Munich Re, commented on today’s news, “The unique value proposition of parametric risk transfer has attracted the attention of many decision-makers in the private and public sectors, contributing to a steady increase in insurance capacity through parametric solutions.

“As a result, Munich Re’s ambition is to bring together its parametric expertise in a dedicated unit and grow its share of parametric business, while helping to reduce protection gaps and enable its clients to become financially more resilient to natural catastrophe risks.”

Rene Mück, Global Head of Parametric NatCat, also said, “While the initial focus will be on natural catastrophe risks, especially in an era of climate change, close coordination and collaboration with Munich Re units offering weather derivatives, corporate parametric solutions along the agricultural and other industrial value chains, as well as epidemic risk solutions, will enable us to offer our clients a full range of parametric risk transfer solutions. We are ready and very much look forward to further enhancing our collaboration with our clients and business partners in the provision of parametric risk transfer solutions.”