Munich Re: Reinsurance market pressure rising, but positive July renewals expected

Global reinsurance giant Munich Re has noted a slight increase in market pressure after the April round of renewals, but believes that the overall market environment will remain positive at the next major reinsurance renewals in July.

In announcing a stellar result for the first-quarter of 2024 this morning, when its business generated an impressive €2.1 billion net result, Munich Re said that it anticipates continued good momentum, helped by positive opportunities to deploy its capacity.

Also assisting in the strong result was a very low combined ratio in property and casualty reinsurance, of just 75.3%, as overall major losses fell year-on-year, helped by a lower level of natural catastrophe loss events in the quarter.

“Munich Re kicked off the new financial year with great momentum. Our Q1 net result this year is nearly 70% higher than in 2023. Every line of business played a role in this impressive performance. In addition, we got a boost from the treaty renewals at 1 April, where we tapped into attractive growth opportunities against a backdrop of continuing high rates. We still expect to generate a profit of €5bn in 2024. In fact, it has become more likely that we will surpass that target,” Christoph Jurecka, CFO of Munich Re explained.

Property-casualty reinsurance generated a net result of €1.336 billion, up strongly from the prior year’s €760 million.

Major losses fell to €650 million, from over one billion euros in the prior year, with man-made major losses rising to €418 million due to the inclusion of the collapse of the Francis Scott Key Bridge in Baltimore, while catastrophe losses fell significantly to €232 million, down from €870 million in the previous year period.

At the latest reinsurance renewals on April 1st 2024, Munich Re grew the volume of business written to €2.6 billion, a 6.1% increase.

The reinsurer said it “exploited the ongoing favourable market conditions to expand attractive business, with growth opportunities being realised particularly in India, Latin America and Europe.”

Price development was stable overall, largely compensating for higher loss estimate trends, Munich Re said.

Interestingly though, Munich Re notes, “market pressure increasing slightly” at the renewals.

This reflects the increased appetite of reinsurers and capital markets players, as well as higher available capacity in the reinsurance market, we expect.

We also suspect this is in part due to higher competition, as reinsurers are keen to maximise their opportunity in the hard market environment, in case softening ensues.

Looking ahead though, it seems Munich Re is not anticipating any significant reversal in market conditions.

The company said, “Munich Re expects the environment to remain positive in the upcoming July renewal round.”

In fact, Munich Re said that it anticipates “sustained advantageous business opportunities in coming quarters,” and as a result says the chance it surpasses its full-year profit guidance of €5 billion has now risen, after the strong start to the year.