The world's largest reinsurer,
Munich Re, expects tough price competition in the
coming months as peers jostle for market share, prompting the
firm to intensify efforts to find new business areas.
"Some of our peers go for volume; they think market share is
important and they want to protect it," Munich Re board member
Torsten Jeworrek told a news conference at the annual industry
meeting of the reinsurance industry in the Mediterranean resort
of Monte Carlo.
"We do not follow this kind of irrational market
competition," said Jeworrek, who is in charge of reinsurance
business at Munich Re.
Reinsurers, who help insurance companies pay big claims for
storm or earthquake damage in exchange for part of their
premiums, renew billions of dollars in contracts each year on
Jan. 1. The sector has seen its pricing power weaken relative to
insurers, with prices for covering natural catastrophe risks
falling by double-digit percentages.
The willingness of many reinsurers to cave in to pressure
from insurance companies for lower premiums prompted Jeworrek's
boss, Munich Re Chief Executive Nikolaus von Bomhard, to say he
was "appalled" by the market situation.
Jeworrek said on Sunday he could not predict when the slide
in prices might come to an end. The trough would probably be
found through a combination of macroeconomic changes,
principally a rise in interest rates, and low reinsurance prices
simply becoming too painful for reinsurers to bear.
Munich Re itself would rather give up business than write
reinsurance contracts that were not profitable, Jeworrek said.
NEW PRODUCTS
To try to offset sliding reinsurance prices, Munich Re has
vowed to intensify the development of new insurance and
reinsurance products and expand the markets where it is active,
Jeworrek said. He pointed out that a number of regions of the
world, such as China, the Philippines or Latin America, were
underinsured.
The reinsurer also sees demand in speciality insurance
risks, where it sees demand for renewable energy, biotech, cyber
and supply chain cover as well as non-damage business
interruption and reputational risk cover for loss of profit.
Munich Re, whose main peers include Swiss Re and
Hannover Re, predicted a moderate rise in demand for
property-casualty insurance, based on rising market penetration
and the increasing value of insured assets.
Europe and North America would see annual property-casualty
premium growth of 1 percent over the next three years, while
Asia-Pacific and Latin America would see growth of 3 percent and
4 percent, respectively, over the same period, the reinsurer
predicted.
(Editing by David Holmes and Keiron Henderson)
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