(Re)insurance markets to continue hardening over the next two years
Source: Middle East Insurance Review | Oct 2020
(Re)insurance markets are set to continue hardening over the next two years or perhaps even a bit longer, according to Munich Re CEO of reinsurance Dr Torsten Jeworrek during a virtual media conference last month.
He said this will not only occur in terms of price changes and increases, but also in terms of the renewed discussion of terms and conditions.
He attributed the expected market hardening to three main drivers:
- The erosion of prices over the last 10-12 years or so, which has resulted in reduced profitability of the industry as a whole;
- Higher loss activity in CAT losses such as typhoons and wildfires as well as man-made losses such as aviation losses, and social inflation, particularly in the US, which has resulted in significant increase in loss ratio over the last few years; and
- Significantly lower interest rates which are present in most major markets.
“All three factors – erosion of profitability and prices, loss activity and interest rate levels – lead to this hardening which I think is undisputed at this time,” he said. “For the next one or two years, I am convinced we will see more hardening in reinsurance than on the primary side, and the biggest drivers are Asia and North America.”
Dr Jeworrek added that loss creep from secondary perils and the tightening of retro markets will also contribute to market hardening.
Munich Re held the virtual conference in light of the Rendez-Vous de Septembre having been cancelled owing to the COVID-19 pandemic. M