Reinsurers expect significantly higher prices

Nfter the traditional reinsurance meeting in Monte Carlo was canceled twice due to the pandemic, the Munich Re reported back with clear statements on this year's price negotiations. The economic situation is uncertain due to the pandemic, the Russian attack on Ukraine and inflation. Reinsurance board member Torsten Jeworrek told international journalists in Monte Carlo that it is difficult to predict how the costs will develop after insurance claims.

Philip Krohn

Editor in business, responsible for "People and Business".

“Inflation is very important for pricing next year. It's a lot more challenging this time than in previous years," said Jeworrek. In the past, reinsurers would have had to negotiate the usual cyclical developments in the market. After years of poor underwriting results, they were recently able to push through rising prices. Industry jargon speaks of a tougher market. But now the hard-to-predict price increases that decide on profitability. “It's not just about a hard or a soft market. We are affected by the economic environment,” said Jeworrek, looking at the shimmering blue of the Mediterranean Sea.

60 percent of the contracts with the Dax group, which is struggling with Swiss Re for the position as global market leader, will be re-signed on January 1st. In a few weeks, the conditions and prices would be fixed. "In the months after that, we'll see if our assumptions about inflation were accurate," Jeworrek said. But in the case of transactions with a shorter time horizon, it will only be seen in three years how an incorrect or correct assessment will affect the result. "Our assumptions must therefore be cautious," he said. With an intended growth of 2 to 3 percent, the inflation rate must be added.

The large European reinsurers, which also include Hannover Re, Scor from France and the insurance market Lloyd's of London, are in a much more comfortable position than they were a few years ago. After a decade and a half of a "soft" market and a few years with high claims, they are now better able to push through higher prices - also because the alternative capital on the market, which has been increasing for years, is no longer increasing. The return on equity of the largest industry participants has averaged a modest 4.4 percent over the past five years. Now there is a growing awareness that these values ​​are too low compared to the risks taken.

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