Emerging corporate risks business bolsters Munich Re in fiercely competitive reinsurance market

Announcing its results, the reinsurer used the same phrases as the leading primary corporate insurers that are also struggle to maintain growth in a persistently tough trading and investment environment. Munich Re reported lower revenue in 2014 than 2013 and said that it would continue to walk away from business that is inadequately priced. This commitment was backed up by the fact that the group increased its dividend for shareholders despite reporting reduced profits and revenue for the year. But at the same time the group said that it would continue to improve service for customers that are prepared to pay an adequate price for cover and remains committed to investment in growth markets by both territory and business line. Notably the German group said that it would continue its efforts to 'push back the limits of insurability' in key areas such as cyber, supply chain, business interruption and reputational risk.hideMunich Re's corporate insurance business now accounts for some 25% of its total P&C book with gross earned premiums of €4.2bn in 2014 against €4bn in 2013. This has grown from €1.9bn in 2008. This business delivered a combined ratio of 88.6% last year compared with 83.8% in 2013 and 87.9% in 2012. The underwriting result was €500m last year against €700m in 2013 and €500m in 2012. The share of the P&C 2014 profit was 32%. Overall the Munich Re group posted an operating profit of €4bn last year compared to €4.4bn in 2013. Gross premiums written by the group fell to €48.8bn last year from €51.1bn in 2013. Nikolaus von Bomhard, Munich Re CEO, said that both the capital markets and reinsurance markets will remain 'challenging' in 2015. The group expects 'fierce' competition to continue. "Rigorous cycle management and underwriting discipline, and excellent client service, will therefore still be extremely important," he said. "This requires great determination from our staff and management to let go of even substantial levels of business where it is no longer possible to maintain adequate prices. This soft market phase will show just who takes their return-on-equity targets seriously," continued Mr Von Bomhard. "There is potential for growth not only from a geographical perspective, as in the booming regions of Asia. Munich Re is also working on pushing back the limits of insurability of risks not yet-or not yet adequately-covered in the market, such as cyber risk, energy, supply chain and business interruption, and protection of reputation," he added. The rising importance of the corporate insurance business to the group was again emphasised as Dr Von Bomhard concluded his presentation. He said Munich Re's strategy is to actively shape the business model. This means 'seizing opportunities for profitable growth, taking advantage of underinsured markets/risks and demographic challenges', he said. Dr Von Bomhard said that the group seeks continued growth in attractive specialty business such as Risk Solutions. He said Munich Re will mitigate competitive pressure and the decline of the traditional book through 'rigorous cycle management', compensating for this through the expansion of 'tailor-made solutions and innovative concepts for new and emerging risks'.

Emerging corporate risks business bolsters Munich Re in fiercely competitive reinsurance market

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