View from the top: Marcus Winter, Munich Re

Marcus Winter, president & CEO of Munich Re North America, P&C Re, held senior positions in Germany and Australia at Munich Reinsurance Co. before moving to its U.S. operations in Princeton, New Jersey, in 2021. He began his career at the reinsurer in 2002, after completing a PhD in economics, concentrating on game theory, and working as a consultant. He spoke with Business Insurance Editor Gavin Souter shortly after Hurricanes Helene and Milton struck the Southeast about the role of property reinsurance, the U.S. liability market and the implementation of artificial intelligence. Edited excerpts follow.

Q: Given the changes in the structure of insurance and reinsurance contracts over the past few years, how do you feel reinsurers are positioned regarding property risk?

A: The core function of reinsurance is to help insurance companies manage volatility. We had a period of time when the reinsurance industry in the U.S. was seen more as a tool to manage the profitability of the insurance companies. That was a tough period for reinsurers and led to the reset we have seen. Now, the reinsurance industry is more positioned to really address volatility, and that really is the area that reinsurance should be used as a tool.

The core profitability has to be addressed via the primary insurance products. You can’t have unprofitable primary insurance contracts and then hope that reinsurance can do the trick to turn that into profitability.

Q: Do you feel there’s still work to be done?

A: Every company has a different perspective of what it wants and what it needs to do, but in general terms I think we are in the right spot for the reinsurance segment.

We have increased our cat exposure in the U.S. over the last three or four years, but we have positioned it more toward parts of the exposure curve that have that volatility, and we like that business.

Q: Regarding liability risks, we hear about difficulties with insurers’ reserves between 2015 and 2019, and there are still questions about 2020 and later. What’s your perception of cedents’ positions? 

A: The perception that was very prominent in the market maybe a year or two ago, that pre-2020 was bad and after 2020 was good, that perception changed. We have been more cautious for 2021, 2022 and 2023 for a long time because we believe that all the underlying problems — like legal system abuse or social inflation, however you want to call that general societal trend where juries feel they have to hand out higher and higher verdicts — have not changed. We have not grown our casualty exposure; we have reduced in certain areas, and for clients that we do support, we see that bilateral flight to quality. So, we have focused more on the clients that have solid underwriting, solid claims and good business structures in terms of distribution and geographic exposures per line of business. Those clients tend to like the fact that we are a long-term and stable reinsurer.

Q: AI has been a huge topic of conversation for the past couple of years. What have you implemented so far? 

A: We have invested for the last few years significantly in our global skills and our global infrastructure. We have teams that find data sets that are relevant for our business, so it’s not just AI, but also very prominently AI. We now see where the combination of technology, and data and analytics skills help us to address business problems in a different way.

On casualty treaty business, in the past the underwriting was more focused on the treaty itself, things like combined ratios, loss ratios, trends, loss development factors, commission levels, covered classes and covered territories. With the new tools, we are now in a situation where we can more and more dig into the exposures that are in the treaty. So, for example, in the old world, we would know how much auto liability or how much general liability is in a casualty treaty, but now we know and can visualize what are the states where the insureds in the treaty have their cars. All those territories have a very different underlying exposure when it comes to auto liability.

We can now solve for the questions that underwriters have had for a long time but just didn’t have the tools to address them.

Q: What does that ultimately help them do? 

A: So, this is not about the price; it is about the risk selection. Do more of the things we like, do less of the things we don’t like, and understand the underlying trends.

Q: How do you see your use of technology and AI developing?

A: When Chat GPT came out — and those types of technologies really are game changers in many places for us — our initial impulse was to say, “There’s a new technology. What can we do with that technology?” Now, it is the other way around, and we say, “What is the problem?” In many cases, Chat GPT helps us to solve the problem, but we also have cases where we think Chat GPT or other large language models are the right tools and it turns out that over the course of the project, there are other technologies or other data sources or other approaches that do a better trick at the specific problem. We’re much more focused on the business problem and not so much on the technology. That’s the benefit of the underlying technology investment.

And for our colleagues that come fresh from university, that’s a really good contact point for the organization. When you hire somebody who has a very strong academic qualification from one of the larger universities, they come with those tool sets, and they are used to working with new methods. For them to see that this has a practical relevance in the day-to-day with a reinsurance company, which maybe you would not have expected 10 years ago, that helps us to attract talent and to keep the talent.

We also see that our clients benefit from our investment. If we invest to solve a problem and we have a question, it turns out that in a very high percentage of cases, our clients also have a question. So, we start to open up more and more our technology environment to our clients.