Munich Re boss expects reinsurance prices to remain high

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The head of Munich Re, the world’s largest reinsurer, expects the benign conditions that have generated record profits for the industry but increased costs for businesses and households to be sustained in the coming months.

Munich Re was one of a string of companies to report bumper profits on Thursday, helped by a steep rise in the cost of both insuring and reinsuring property against natural catastrophes in recent years.

This has led to more expensive coverage for consumers and businesses, contributing to an affordability crisis in some parts of the world.

The boom in profits led to expectations that prices would begin to fall as new suppliers were attracted to the market.

But Munich Re chief executive Joachim Wenning said on Thursday he did not foresee any “decline” in the reinsurance market ahead of key policy renewals at the end of the year, of which property catastrophe cover is a major part.

“We are very confident that the market environment . . . it will remain unchanged, meaning very attractive,” he said.

Munich Re, a heavyweight in the property catastrophe reinsurance market, reported a record 3.8 billion euros in after-tax profits in the first half, also helped by a strong performance in other areas. Beazley and Lancashire, two Lloyd’s of London firms that offer property insurance and reinsurance along with other types of cover, also made record profits.

Executives say the reinsurance sector continues to recover from years of underwriting losses before prices start to rise in 2022. Reinsurers “need to win now what they haven’t been able to win for so long,” Wenning said.

Reinsurers have also recently benefited from a quieter period for major disasters such as hurricanes and by tightening policies to reduce their exposure to events such as storms and floods. These events have affected mass-market home insurers more, particularly in the US, where many state regulators cap prices for local providers.

London-listed Beazley reported pre-tax profits doubled to a record $729 million in the first half, boosted by strong underwriting performance and higher returns on its investment portfolio .

Its combined ratio — a measure of claims and expenses as a proportion of premiums — improved from 88 percent to 81 percent. Beazley said it was likely to hit about 80 percent for the full year, sending its shares up 11 percent in London.

Chief executive Adrian Cox said the performance was a mix of good risk selection and higher prices.

The property reinsurance segment may taper off first as insurers have paid out significant extreme weather claims, he said.

“There are many losses (for insurers). It might get a little more competitive, but I think it will be less than reinsurance,” Cox said.

Lancashire’s after-tax profits, also published on Thursday, rose by a quarter on the previous period to $201 million in the first half of the year.

Chief executive Alex Maloney said he expected any softening of the property insurance market to be gradual.

“You don’t go from a great market to a terrible market in a year,” he said. “It never happens that way.”