Munich Re seeks North America growth
The NFIP placed its first significant reinsurance
programme in January 2017, ceding $1.04 billion
of coverage to a group of 25 private reinsurers
and Lloyd’s syndicates in an effort to reduce the
accumulation of future debt to the Treasury.
Munich Re has also participated in this panel.
The reinsurers that provided the NFIP
with flood reinsurance protection are expected
to suffer a total loss given the magnitude of
US Congress has extended the deadline
to reauthorise the NFIP. The programme’s
original deadline of September 30 was pushed
back to December 8.
“We very much hope this programme will
go on,” Pohlchristoph said. He expects that
Harvey with the significant flooding in the
Houston area will drive the political decisionmaking
in that direction.
“I would be very surprised if we don’t see
any significant changes here,” he noted.
While it is fairly clear that rates will increase
in the areas hit by the recent nat cat events, it
is less clear how this will affect rates elsewhere.
“At the moment it is very difficult to assess
and quantify how price increases could look in
other parts of the world,” Pohlchristoph said.
“But it’s clear that when you think about a
reinsurance portfolio this is a global business
and at the end there is also some kind of
internal competition for capacity, so we would
direct our capacity to those areas which offer
the biggest profitability,” he noted. n
“If there are opportunities when prices are
adequate we will be there,” he noted.
Opportunities may appear as the US
National Flood Insurance Program (NFIP)
transfers more risk to the private sector.
Hurricane Harvey, which is expected to have
caused a combined wind, surge, and inland flood
losses of between $70 and $90 billion, was mainly
a flood event. It may produce at least $4 billion in
flood claims to the NFIP reinsurance programme,
according to estimates. However, most of the
flood losses are expected to be uninsured.
The NFIP is now over $30 billion in debt
to US taxpayers, and it may need an additional
$16 billion to cover claims from recent storms,
Volatility in Spanish bond market will hit re/insurers
Volatility in the Spanish bond market
“Over the medium term,
political uncertainty will be a
drag on investment markets.”
AM Best notes that life insurers are
likely to be the most adversely impacted
by unsettled bond markets, owing to their
longer-tail risk and need to manage assetliability
In the short term, AM Best anticipates
that volatility will remain the rule and
not the exception, although to a certain
extent, the downside may be limited as
Spain retains the support of the European
(Continued from page 1) After the third quarter
nat cat losses, the traditional reinsurers may
have the alternative market participants on
their side as these will also want higher returns,
“After the significant losses, investors are
probably expecting higher yields and higher
returns and this will also drive prices in the
retro market. We already see that happening in
the retro market,” Pohlchristoph said.
Before the third quarter events, reinsurers
like Munich Re have been struggling to find
profitable growth opportunities in P&C and
have been shedding business as rates were
often deemed inappropriate. But now North
America may offer the business opportunity
Munich Re was waiting for.
“Here the capacity can be placed at the
currently most attractive rates,” Pohlchristoph said.
Munich Re has not yet disclosed any estimates
for the losses it is expecting for its own business from
the third quarter events. But in mid-September
the reinsurer issued a profit warning following the
hurricanes in the US. Losses from Harvey and
Irma could mean that Munich Re will miss its
profit guidance of €2.0 to €2.4 billion for 2017, the
company said in a September 13 press release.
“Our risk appetite remains unchanged. We
have not yet disclosed any more concrete loss
estimates. This is work in progress, but we are
absolutely sure that our risk appetite can stay the
same. It is not an event that would put us under
pressure in that regard,” Pohlchristoph said.
due to instability created by Catalonia’s
independence vote is a concern for Spanish re/
insurers, according to AM Best.
Investment portfolios of Spanish reinsurers
typically have a high concentration in Spanish
sovereign fixed-income securities, an AM Best
briefing, Enterprise Risk Management to the
Fore as Catalonia’s Sovereign Status Remains
Prior to Catalonian leader Carles
Puigdemont’s October 10 speech in which he
announced that he would honour the result
of the referendum and declare independence,
nervousness in the market led to an increase in
the yields of Spanish sovereign bonds.
Central Bank (ECB) and the European
Union (EU), which can act as a stabilising
factor for sovereign yields.
“Over the medium term, political
uncertainty will be a drag on investment markets,
and consumer and investor sentiment,” states
the report. “Furthermore, the contagion effects
may filter through into other sectors, such as
the housing market, which has the potential
to slow economic growth further and increase
“A prolonged period of tension could
negatively impact the country’s economy
and public finances, and any lowering of the
credit quality of Spanish debt may impact the
financial strength of insurers.” n
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