Munich Re vows to invest more in climate friendly technology

Risk and insurance managers across Europe are becoming increasingly frustrated with the apparent inability of the insurance sector to back the tools and technologies needed to support the transition to net zero. As evidenced by Commercial Risk’s annual Risk Frontiers Europe survey of Europe’s leading risk managers and discussion at last week’s GVNW Symposium, they want to see carriers focusing less on exclusions for old technology and more on innovation for the new. Munich Re has clearly received this message, as well as rising frustration over limited coverage for climate change related risks, as it announced during the Monte Carlo Rendez-Vous that it would expand its risk modelling and high-definition models to better reflect increasing natural hazards risks. The reinsurer also said that it would step up resources and expertise in innovative and complex covers for all types of climate-friendly energy technology. “Key growth areas here are classic construction and operational covers for renewable energy and grids,” said Munich Re. It said that the market environment for reinsurers remains promising but faces heightened uncertainty. “In the period 2023-2025, the global reinsurance market is expected to see a slight uptick in real average annual growth, somewhat below 2020-2022 levels. Future growth is anticipated to be highest in Asia Pacific and Latin America,” it said. The reinsurer pointed out that, according to data from AM Best and Guy Carpenter, reinsurance capital fell last year but is predicted to rise to $461bn in 2023, up from $434bn last year, adjusted for equity effects from higher interest rates. “Reinsurance capital is an indicator for available reinsurance capacity. The market for alternative risk transfer has remained roughly unchanged, with the volume of capital invested totalling around $100bn. Within this market, there has been a further clear shift towards cat bonds,” said Munich Re. Inflation may finally be easing globally but it remains a major market driver, said the reinsurer. “It remains particularly important for insurers and reinsurers to be accurate in their estimates of how inflation will develop. In the case of 2021 and 2022, inflation was almost twice as high as expected. Inflation has now started to fall again. However, average consumer price inflation in industrialised countries is likely to still be above central banks’ targets of around 2% in the coming years, even in the baseline scenario, and thus well above the inflation rates seen in previous years. The uncertainty involved is considerable – appreciably higher inflation rates are a much more likely risk scenario than lower, less pronounced price increases,” said Munich Re. “At the same time, many risks are changing – a case in point being natural hazards. Severe thunderstorms with tornadoes and hail in the US caused losses amounting to $35bn in the first half of 2023, of which $25bn were insured,” added the reinsurer. “These orders of magnitude are similar to those expected from a major hurricane and have practically become the norm rather than the exception. A large body of scientific research indicates that climate change is increasing the frequency of severe thunderstorms. Market loss data shows an upward trend in losses from such events, including in Europe, and from other non-peak perils such as wildfires and flash floods in many regions around the world,” said Munich Re, clearly suggesting that a return to soft market conditions remains unlikely in the foreseeable future.

Munich Re vows to invest more in climate friendly technology

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