Soft market was reason to be disciplined at renewals report Munich Re

“We were ready to give up business,” said Torsten Jeworrek, Munich Re’s Reinsurance Chief Executive Officer speaking on a conference call yesterday to discuss the reinsurer’s preliminary financial figures and renewal results. As a result of Munich Re’s strict-cycle management, the reinsurer gave up 16% of treaty business up for renewal–valued at roughly €1.3bn–for reasons of pricing, he said. Mr Jeworrek echoed comments made Wednesday by Hannover Re that the market had seen rate reductions of 5% to 10% for non-life reinsurance. “We share this assessment because if you look at the loss-free non-proportional business, there we observed 5% to 10%, as well, but if we look at the entire portfolio-including the entire proportional business-than we tend to see something between 2% and 5%,” Mr Jeworrek said.hideMunich Re – which sells primary insurance through ERGO Insurance Group – found that the “slight decline in prices” was true across all lines and regions in both the primary and reinsurance markets, Mr Jeworrek said. Globally, catastrophe business prices for reinsurance mostly retreated in 2010, with rate reductions particularly marked for US risks. Hannover Re responded to the situation by also scaling back its business in areas where it believed prices were not adequate, reducing its volume in this segment by 15%, the company said. Both Hannover Re and Munich Re reported that rates hardened in segments and contracts with above average loss levels. Hannover Re said double-digit price increases were booked under loss-impacted programs, such as Chile, where prices climbed by up to 40% following the devastating earthquake in February 2010. Munich Re was heavily impact by natural catastrophe losses in 2010, amounting to around €1.56bn, up from just €200m a year earlier. In the fourth quarter, the largest individual loss was the flooding in northeastern Australia, with claims of around €270m. As a result, rates during the renewal rose markedly for natural catastrophe covers in Australia, New Zealand, and Chile, Munich Re reported. Like Hannover Re, Munich Re said its rates in the offshore energy sector also increased due to the Deepwater Horizon oil spill in the Gulf of Mexico. Overall, Munich Re said the net outcome of its 1 January renewals was a 4.1% rise in premium volume to €8.2bn, with prices edging up 0.1% compared with the previous year. Hannover Re also reported a broadly stable renewal as the company boosted premiums by 2%. Munich Re’s gross premiums written rose by almost 10%, to €45.5bn, the company reported. However, with natural catastrophe losses impacting profits, the reinsurer had a consolidated result of €2.43bn for 2010, down from €2.56bn the previous year. "The markets remain challenging," stressed Mr Jeworrek in an earlier statement. "Capacity continues to be available in sufficient quantities in most lines and regions. We have geared ourselves to this situation, consistently pursuing our strategy–including in particular the expansion of niche business–and writing very selectively. With this approach and our high degree of client focus, we are able to operate our business profitably even in this difficult environment." Meanwhile, ERGO Insurance Group more than doubled its profit to €355m last year, up from €173m, based on preliminary figures. Gross premiums written in the primary insurance segment in 2010 grew by around 5%, to €17.5bn. The combined ratio for property-casualty primary insurance last year amounted to 96.8%, compared to 93.2% the previous year. Natural hazard events, such as the long harsh winter that extended well into spring and damage caused by floods, were responsible for considerably higher claims expenditure, especially in international business, the company said. "We invested a lot of effort in successfully launching the ERGO brand in the German insurance market,” noted ERGO CEO Torsten Oletzky. “In the process, we managed to improve both our premium income and our result. I therefore regard 2010 as a good year for ERGO."

Soft market was reason to be disciplined at renewals report Munich Re

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