Global reinsurance market to grow by 2-3% over next three years: Munich Re

The market environment for reinsurers remains both promising and challenging, and after impressive growth in recent years, the marketplace is poised to grow by 2-3% over the next three years, Munich Re said at the 66th Rendez-Vous de Septembre in Monte Carlo.

Growth of 2-3% over the next three years, adjusted for inflation, would put the global reinsurance market “neck-and-neck” with the primary space.

Munich Re, one of the world’s largest reinsurers, feels that reinsurance sector growth could be even stronger in Asia Pacific and Latin America, but there’s also potential for weaker growth in more advanced regions such as the US and Europe.

At RVS 2024, the firm highlighted natural catastrophes and climate change, casualty business and claims inflation, and cyber as areas that require specialist risk expertise and a disciplined approach.

On nat cats, the reinsurer’s data suggests an upward trend in insured losses that is closely linked to increasingly exposed assets. The reality is that while major hurricanes and earthquakes have the potential to drive high insured losses, in recent times, non-peak perils, notably severe convective storms and floods, are driving the rise of insured losses, which now often exceed the $100 billion threshold.

When it comes to US casualty, Munich Re notes the trend toward verdicts awarding higher and higher damages, and executives at today’s briefing stressed that reserve pressures remains a sector-wide concern in 2024.

Discussing the third key area, cyber, the reinsurer asserted that the cyber re/insurance market continues to grow in importance and is poised to expand significantly.

“The areas of natural catastrophes, casualty and cyber are symbolic of Munich Re’s role. We are a risk carrier with considerable financial resources and unique expertise, particularly when it comes to the largest and most complex risks. Our clients can rely on our ability to leverage our knowledge and strength to mitigate their claims volatility. In turn, we will not hesitate to discontinue business that does not meet our technical criteria for sustainable profitability,” said Board member Stefan Golling.

As well as these specific parts of the reinsurance market, Munich Re also commented on the market more broadly, emphasising that the sector has now achieved a “sensible balance” in a landscape characterised by robust demand.

“Nevertheless, considerable uncertainty remains: claims inflation is still high in a number of segments and there are significant downside risks hanging over the overall economic environment,” said Thomas Blunck, Member of the Board of Management. “Munich Re will consistently work to ensure risk-adequate rates and conditions. Our financial strength and expertise will then also put us in a position to selectively expand our capacities further, to the benefit of our clients.”

As expected, the level of reinsurance capital, both traditional and alternative, has grown so far this year, and with demand for protection still very high, it’s likely to increase even further by year-end.

“Adequate earnings are crucial for the reinsurance sector, which was unable to earn the cost of capital in four out of the last seven years. But one good year alone isn’t enough. We have to consistently achieve risk-adequate rates, given that rising volatility and risk exposure translate into a need for more risk capital,” added Blunck.

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