MONACO: The world's largest reinsurer, Munich Re, expects tough price competition in the coming months as peers jostle for market share, prompting the firm to intensify efforts to find new business areas.
"Some of our peers go for volume; they think market share is important and they want to protect it," Munich Re board member Torsten Jeworrek told a news conference at the annual industry meeting of the reinsurance industry in the Mediterranean resort of Monte Carlo.
"We do not follow this kind of irrational market competition," said Jeworrek, who is in charge of reinsurance business at Munich Re.
Reinsurers, who help insurance companies pay big claims for storm or earthquake damage in exchange for part of their premiums, renew billions of dollars in contracts each year on Jan. 1.
The sector has seen its pricing power weaken relative to insurers, with prices for covering natural catastrophe risks falling by double-digit percentages.
The willingness of many reinsurers to cave in to pressure from insurance companies for lower premiums prompted Jeworrek's boss, Munich Re Chief Executive Nikolaus von Bomhard, to say he was "appalled" by the market situation.
Jeworrek said on Sunday he could not predict when the slide in prices might come to an end.
The trough would probably be found through a combination of macroeconomic changes, principally a rise in interest rates, and low reinsurance prices simply becoming too painful for reinsurers to bear.
Munich Re itself would rather give up business than write reinsurance contracts that were not profitable, Jeworrek said.
NEW PRODUCTS:
To try to offset sliding reinsurance prices, Munich Re has vowed to intensify the development of new insurance and reinsurance products and expand the markets where it is active, Jeworrek said.
He pointed out that a number of regions of the world, such as China, the Philippines or Latin America, were underinsured.
The reinsurer also sees demand in speciality insurance risks, where it sees demand for renewable energy, biotech, cyber and supply chain cover as well as non-damage business interruption and reputational risk cover for loss of profit.
Munich Re, whose main peers include Swiss Re and Hannover Re, predicted a moderate rise in demand for property-casualty insurance, based on rising market penetration and the increasing value of insured assets.
Europe and North America would see annual property-casualty premium growth of 1 percent over the next three years, while Asia-Pacific and Latin America would see growth of 3 percent and 4 percent, respectively, over the same period, the reinsurer predicted.
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