MONTE CARLO (dpa-AFX) - The world's largest reinsurer Munich Re is not shying away from taking on more risks of this kind, despite devastating floods and forest fires. "We have an appetite for natural catastrophe risks," board member Stefan Golling said at the annual reinsurers' meeting Sunday in Monte Carlo. While some providers have pulled out of that business, Munich Re isn't just going for higher premiums. Liability limits and other conditions are often even more important, Golling said. For 2023, he expects another expensive natural catastrophe year.

At the traditional "Rendez-Vous de Septembre," reinsurers such as Munich Re, Swiss Re and Hannover Re have again been sounding out prices and conditions for treaty renewals at the coming turn of the year with primary insurers such as Allianz and Axa in the Principality of Monaco since the weekend.

In the previous renewal rounds, the reinsurers had already significantly tightened the price screws on their clients. In other words, if a primary insurer wants to transfer risks to a reinsurer, it has to pay significantly more than it did just a few years ago. This is one of the reasons why the rating agencies Standard & Poor's and Fitch have raised their outlooks for the reinsurance industry. Margins in their business had improved, and the companies were also able to benefit from higher interest rates on the market.

Opinions differ as to whether reinsurers have overshot the mark in their pricing policy. For example, the rating agency Moody's reported on the basis of a survey that nine out of ten primary insurers no longer wanted to offload additional risks to reinsurers in 2024. Most of them would have cited increased prices as the reason.

Because insurance claims will become more expensive simply because of inflation, primary insurers are likely to take a larger share of future losses on their own dime, concludes Moody's analyst Helena Kingsley-Tomkins. Some insurers report that they have not been able to place their risks with reinsurers. But experts at rating agency Fitch now believe this shortage has been resolved: "You can reinsure your risks if you are prepared to pay the appropriate price," said Fitch analyst Robert Mazzuoli in Monte Carlo.

Munich Re, for example, again expects slight growth in the reinsurance market in the years 2023 to 2025 - even after deducting inflation. However, according to their assessment, the increases are likely to be lower than in the previous three years.

The rating agency Standard & Poor's also expects growing risks to further increase the need for reinsurance cover. According to Fitch, however, the price increase should weaken in 2024 - and then come to an end. Fitch analyst Brian Schneider even expects prices to fall slightly in 2025. Although Munich Re does not focus on further price increases, it does point to increasing losses from natural catastrophes and other weather events.

In the first half of the year, the company says natural catastrophes left economic losses of around $110 billion - of which $43 billion was insured. For the year as a whole, insured natural catastrophe losses are therefore likely to exceed the 100 billion mark, as in the previous year, estimates board member Golling. This would again be above the average for the years 2017 to 2021. In 2022, they were even higher at 120 billion dollars. Half of this was attributable to the destruction caused by Hurricane Ian alone.

In the current year, wildfires in Hawaii and southern Europe and floods in Slovenia and Austria will be added to the total in the third quarter. And the hurricane season in the Caribbean is not over yet: Hurricane "Lee" is currently threatening the islands in the Caribbean.

Meanwhile, insurers and reinsurers are increasingly concerned about smaller natural events that individually would not make it onto the list of major natural catastrophes. In the first half of the year alone, severe thunderstorms with tornadoes and hail caused losses of $35 billion in the U.S., said Munich Re Board member Blunck. Of that, he said, 25 billion was insured - a sum equal to that of a major hurricane.

Meanwhile, Munich Re executives and experts warn against underestimating the impact of inflation on the size of insurance losses. S&P analyst Johannes Bender does expect reinsurers to be able to push through higher premiums again for 2024. "But we are not sure whether the price increases will be enough to offset inflation," he said in Monte Carlo.

Munich Re, like the rating agencies, sees the big growth market in cyber insurance against losses related to computer systems, data and the internet. The company expects economic losses from cyber attacks to triple to about $24 trillion by 2027 compared with last year. Cyber insurance premiums industrywide are expected to increase two-and-a-half-fold to $33 billion by then, the executive estimates.

However, according to Standard & Poor's, so far only primary insurers are making money in cyber business. Reinsurers would therefore have to raise premiums, thus skimming some of the profits from primary insurers, the analysts wrote./stw/he