Association responds to Munich Re’s calls for pricing discipline; Says members should be “recognised and rewarded” by insurers
A changing risk landscape has led Munich Re to call for more disciplined risk management, particularly given “extreme” inflation risk and a spate of natural catastrophe losses.
Risks such as cyber-attacks and climate-risk-related extreme weather are causing increased claims frequency as well as severity for insurers, while inflation is further driving up the severity of those claims, Munich Re has warned.
Munich Re said it would continue to make reinsurance capacity available, but that it and its ceding insurers need to price risks accordingly.
“What is crucial is that we ensure, together with our clients, that all of these developments are adequately covered in the pricing,” said Thomas Blunck, member of the board of management, Munich Re.
The macroeconomic situation, even if it becomes more stable, will remain tough for the duration of 2023, Munich Re cautioned, noting that its analysts have revised forecasts down for the US and Europe.
“Many markets are now seeing inflation rates reach their highest levels in 40 or even 50 years. In Europe, prices are being driven up primarily by energy and food costs,” Munich Re said.
These factors will put pressure on insurance capacity, which is expected to shrink. At the same time, reinsurers facing the same pressures are also limiting supply of capacity, all of which will lead to greater risk retention, putting the onus on strong risk management throughout the risk transfer chain.
In response to Munich Re, Airmic has called for the well-managed risks of its members to be recognised and rewarded by insurers and reinsurers.
“Airmic understands the need for a resilient insurance industry. However, Airmic also expects the well-managed risks of our members to be recognised and rewarded,” said Julia Graham, CEO, Airmic.
“Risk management is a two-way street, and it is important that insurers and reinsurers remember and reflect this when pricing cover,” Graham added.