FRANKFURT/MONTE CARLO (dpa-AFX) - The major reinsurers such as Munich Re and Hannover Re are heading for good business at the industry meeting in Monte Carlo, according to experts. The pricing environment is favorable and the companies have increased their market power over primary insurers, industry expert Johannes Bender of rating agency Standard & Poor's (S&P) said in Frankfurt on Tuesday. In price negotiations for 2024, reinsurers should at least defend their "good margins" from the current year, he said.
Starting this Saturday (Sept. 9), reinsurers will meet again with their clients and brokers in Monte Carlo to hash out terms for next year. After reinsurers have been repeatedly pushing through higher prices with their clients for some time, Standard & Poor's has now raised its outlook for the industry from negative to stable. Companies are on track to earn back their cost of capital this year, Bender said.
The companies' increased market power is also due to a change in business, according to Bender. "Reinsurers have gone back to where they used to be, so they're covering more large losses and less proportional business with frequency losses." In other words, they no longer step in proportionately for every claim, but only above a certain amount. Because of the higher prices for reinsurance cover, primary insurers are now having to consider more carefully which risks they can bear themselves - and which they absolutely have to reinsure.
It is true that the rating agency Moody's has just found in a survey that more than 90 percent of primary insurers no longer want to cede any additional risks to reinsurers. In S&P's view, however, regional insurers in particular are unlikely to be able to avoid ceding some of their risks so that a severe natural catastrophe, for example, does not cost them too much. Bender and his colleague Volker Kudszus pointed to the fires in southern Europe and Hawaii, as well as the floods in Austria and Slovenia: "For Slovenian insurers, reinsurance protection is still essential."/stw/ngu/stk