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The head of Munich Re, the world’s biggest reinsurer, expects the benign conditions that have powered record profits for the industry, but increased costs for businesses and households, to be sustained in coming months.
Munich Re was one of a string of companies to report bumper profits on Thursday, helped by a steep increase in the cost of both insuring and reinsuring properties against natural catastrophes in recent years.
This has fed through to more expensive cover for consumers and businesses, contributing to an affordability crisis in some parts of the world.
The boom in profits had led to expectations that prices would begin to fall as new providers were drawn to the market.
But Munich Re chief executive Joachim Wenning said on Thursday that he does not anticipate any “softening” in the reinsurance market ahead of the key policy renewals that happen at the end of the year, of which property catastrophe cover is a major part.
“We are very confident that the market environment . . . will be unchanged, meaning highly attractive,” he said.
Munich Re, a heavyweight in the property catastrophe reinsurance market, reported a record €3.8bn of post-tax profits in the first half, helped also by a strong performance from other areas. Beazley and Lancashire, two Lloyd’s of London firms that offer property insurance and reinsurance, alongside other types of cover, also made record profits.
Executives argue that the reinsurance sector is still playing catch-up after years of underwriting losses before prices began to pick up in 2022. Reinsurers “have to earn now what they couldn’t earn for so long,” Wenning said.
Reinsurers have also recently benefited from a quieter period for major disasters such as hurricanes, and by tightening their policies to reduce their exposure to events such as storms and floods. Those events have weighed more on mass-market home insurers, particularly in the US where many state regulators cap pricing for local providers.
London-listed Beazley reported pre-tax profits doubled to a record $729mn in the first half, lifted by a strong underwriting performance and higher returns on its investment portfolio.
Its combined ratio — a measure of claims and expenses as a proportion of premiums — improved from 88 per cent to 81 per cent. Beazley said it would probably hit around 80 per cent for the full year, sending its shares up 11 per cent in London.
Chief executive Adrian Cox said the performance was a mixture of good risk selection and higher prices.
The property reinsurance segment was likely to soften first, given that insurers have paid out significant claims for extreme weather, he said.
“There are lots of losses [for insurers]. It might get a bit more competitive but I think it’ll be less so than the reinsurance,” Cox said.
Lancashire’s post-tax profits, also published on Thursday, were up a quarter from the prior period to $201mn in the first half.
Chief executive Alex Maloney said he expected any softening in the property insurance market to be gradual.
“You don’t go from a great market to a terrible market in a year,” he said. “It never happens that way.”
