- Munich Re wants to be cautious despite high profits
Despite high natural disaster damages and a weak economy, the world's largest reinsurer, Munich Re, continues to make good business. In the first six months, the Munich DAX company has already achieved three-quarters of its annual profit target of five billion euros, earning around 3.8 billion euros in the first half. However, CEO Joachim Wenning and CFO Christoph Jurecka are maintaining their cautious outlook. Given the increasing damage from cyber attacks year after year, the company is also becoming more cautious in its cyber insurance business.
Wenning hinted that the company could exceed its profit target of five billion euros by the end of the year: "It has become somewhat more likely that we may even exceed this target by the end of the year." However, this would depend on no major natural disaster causing high losses.
Hurricanes are the main risk
Munich Re's main business is insuring primary insurers like Allianz. Traditional risks are natural disasters, with hurricanes on the US east coast often being the most expensive due to high values being insured. However, as the hurricane season ends in the fall, good numbers in the first half of the year do not guarantee a good year overall.
The first six months of this year were slightly less expensive for the company in terms of natural disaster losses, with around 1.1 billion euros, compared to the first half of 2023. However, losses are increasing in the long term. "Annual losses of over 100 billion US dollars are now commonplace," said Wenning, referring to the estimated global economic costs. Currently, this is benefiting Munich Re's business, as the reinsurance industry has been able to implement price increases overall.
Caution in cyber insurance
Despite strong demand, Munich Re is becoming increasingly cautious in its cyber insurance business due to the widespread hacker crime. This year, Munich Re has been very restrained in concluding contracts and has not renewed some contracts. "We want to avoid being drawn into a segment where systemic cyber risks could materialize as losses for us, as that would simply not be sustainable," said the CEO. Wenning put Munich Re's global market share in cyber business at ten percent. "We don't want that to become 20 or 30 percent."
Given the increasing frequency and cost of cyber attacks, Munich Re is deliberating on expanding its cyber insurance portfolio with caution. The CEO mentioned, "We need to ensure that our cyber business remains manageable and sustainable, considering the potential systemic risks involved."
In the context of the European economic landscape, numerous countries are advocating for a stronger economic and monetary union, recognizing its potential to mitigate risks and foster resilience in the face of challenges like natural disasters and cyber threats. Wenning, reflecting on this, said, "A well-functioning economic and monetary union could enhance our ability to manage and distribute risks more effectively, ultimately benefiting the reinsurance industry as a whole."
