Munich Re slides to P&C reinsurance loss in Q3

Munich Re has reported a loss in its P&C reinsurance business in the third quarter, as Covid-19 and nat cat losses exceeded €1.5bn. Munich Re said its P&C reinsurance business recorded a €23m loss in the third quarter of 2020, down from a positive €464m a year earlier. The combined ratio deteriorated 8.3 points to 112.2%. The third-quarter loss reflected large losses totalling €1.52bn. This was a combination of additional coronavirus insurance losses and higher-than-expected catastrophe claims. The P&C reinsurance business was hit by €474m in natural catastrophe losses, namely US windstorm and wildfires, as well as a “low three-digit-million euro” loss from the Beirut port explosion. The quarter was also impacted by an additional €800m in losses related to Covid-19, mostly event cancellation claims and business interruption (BI) reinsurance, and to a lesser extent credit and casualty insurance. “The third quarter again saw losses incurred in connection with the cancellation or postponement of major events, as well as losses in other lines of property-casualty reinsurance, such as business interruption,” Munich Re said in a trading update. Speaking to journalists on Thursday, Christoph Jurecka, Munich Re’s chief financial officer, said further Covid-19 claims were possible if more events are cancelled in the remainder of 2020 and 2021. Credit claims could materialise next year if lockdowns continue into 2021 and if government support and reinsurance schemes are withdrawn, Mr Jurecka warned. He also said further BI claims could not be “ruled out” from the latest lockdowns and ongoing uncertainty with litigation. Overall, the German group made a profit of €999m in the first nine months of 2020, well under half the €2.5bn reported in the same period of 2019. However, the result was “remarkable” given Covid-related losses of €2.3bn in 2020 to date, said Mr Jurecka. Group profits were €199m in Q3, down from €800m in the same period of 2019. According to Mr Jurecka, a strong result at Munich Re’s primary insurance carrier Ergo in the third quarter helped “dampen” volatility seen in reinsurance business. Ergo reported an improved profit of €136m in the third quarter and €381m for the first nine months. Ergos’ third-quarter result was driven by a strong performance at its international and German P&C businesses, which generated profits of €57m and €48m respectively. Additional Covid-19 BI and event insurance losses were more than compensated for by lower losses from natural catastrophes. Covid-19 losses at Ergo were “insignificant” from a group perspective, Mr Jurecka said. Munich Re’s gross premiums written increased 3% to €14.2bn for the third quarter and by 6% to €41.3bn for the first nine months of 2020. P&C premiums rose slightly to €6.8bn in Q3, from €6.6bn in the same period of 2019. Mr Jurecka said a combination of factors were supporting market hardening as the reinsurer goes into the major January renewal season. These included recent natural catastrophe losses, rising primary insurance rates, trends in the alternative capital market and casualty reserving issues for insurers.

Munich Re slides to P&C reinsurance loss in Q3

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