Munich Re 'rigorously' pricing for inflation, keeps 2022 earnings guidance

Munich Re has warned of challenging times ahead as the business seeks to overcome inflation pressures, climate change fuelled-extreme weather events and other threats.

The warning came as the world’s largest reinsurer announced separately the business is expected to achieve about €500 million ($772 million) in net profit for the third quarter to September. The business will provide finalised third quarter earnings figures on November 8.

Munich Re says while it has become significantly more challenging to meet the 2022 profit target of €3.3 billion ($5.1 billion), the business is still keeping that guidance.

The reinsurer says “rigorously pricing in inflation” is key for the business, given the ongoing economic landscape.

“The outlook both on the economy and on inflation has become bleaker in the past few weeks, especially in Europe,” Member of the Board of Management Thomas Blunck said.

“That, along with increasing risks from cyber attacks and natural disasters, puts insurers in a difficult and complex situation where financial strength and risk expertise will be what pay off.

“Inflation expectations and changing risks have to be reflected in our pricing for insurance cover.”

Munich Re says in today’s difficult economic environment, precisely assessing changing risks is also an absolute must.

Two hailstorm events in France this year have caused insured losses of €4 billion ($6.1 billion), evidence of the changing conditions that are occurring.

The severity of the storm cells led to an “extraordinarily” high quantity of hailstones with a diameter of over 10cm.

“Munich Re is greatly stepping up its research and modelling of risks such as severe thunderstorms with hail or heavy rainfall,” Dr Blunck said.

“Our experts from a wide range of fields in the natural sciences have been analysing the consequences of climate change for decades.”

Meanwhile Munich Re says Dr Blunck will become Chair of the Reinsurance Committee of the Group’s Board of Management on January 1, replacing Torsten Jeworrek who is stepping down at the end of the year.

Dr Blunck, who joined the Board of Management in 2005, will also chair the Global Underwriting and Risk Committee.

In other board changes, Clarisse Kopff and Mari-Lizette Malherbe will join as new members on December 1 and January 1 respectively.

Ms Kopff will head the Europe and Latin America Non-Life division and Ms Malherbe will take over responsibility for the Life and Health division from Dr Blunck.