Munich Re to maintain ‘significant’ backing for cyber
Reinsurer ‘sticking firmly’ to systemic risk exclusions
Munich Re told those gathered at the Monte Carlo Rendez-Vous it plans to “continue providing significant capacity” for cyber risk over the coming years but will stick to its guns on avoiding systemic threats.
The reinsurer predicts that the cyber insurance market will see ‘”substantial growth” in the next few years that it will help support though capacity, investing in expertise and advancing risk modelling.
Munich Re believes that a sustainable and profitable cyber market is key so will be “sticking firmly” to its strategy of not covering systemic risks like cyber war.
In its Monte Carlo briefing, Munich Re said the reinsurance market has reached a “sensible balance” and clearly feels that current pricing must be maintained.
“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,” said Thomas Blunck, member of the board of management.
Munich Re said that developments in a number of areas call for specialist risk expertise and a disciplined approach. One of these is casualty business.
“Due to the long-tail nature of the business, insufficient rates can impact profitability for several years. In addition, in the key US market, the trend toward verdicts awarding higher and higher damages continues, a development that is also benefiting specialised lawyers and the investors financing these proceedings. All in all, this equates to a ‘tort tax’ of around $3,600 a year for every household in the US,” said Munich Re.
Its research suggests there are “many years” in which casualty reinsurance rate development has not kept pace with claims inflation in the US.
“Munich Re will continue to make its expertise and capacity available to provide close support to clients who clearly acknowledge the implications of legal system abuse and claims inflation,” it added.
