Swiss Re Insurance-Linked Fund Management

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Hard market the right time to expand in nat cat: Munich Re CFO Jurecka


The current hard reinsurance market environment is exactly the right time to expand in natural catastrophe risks, according to Munich Re CFO Christoph Jurecka, who explained today that the reinsurer is growing its nat cat exposure within risk tolerances, to capitalise on higher pricing.

christoph-jurecka-munich-re-cfoThe company reported its first-quarter 2023 results this morning, revealing continued strong growth in property and casualty reinsurance through the year-to-date, and expansion into non-proportional, so excess-of-loss, catastrophe reinsurance business a particular feature of the reinsurers growth so far this year.

Discussing the reinsurers performance at an earnings call today, Christoph Jurecka, Munich Re CFO explained, “We are obviously enjoying a hard market and expanding our business into that hard market.”

Explaining that, on catastrophe reinsurance underwriting growth, “Strategically we are going as far as we can when it comes to cat exposure and for some perils, we’re getting close to our risk budget, so to the upper limit of our risk budgets.”

Jurecka further stated that, “A hard market is exactly the point in time you should do that, because now it’s the time to make money with that business.”

Munich Re, like many other major reinsurance firms, has been growing the business in recent years across a number of lines, as the market began to firm.

Again like many others, it appears now is seen as the time to expand to near risk limits for natural catastrophe exposure, given the market may now have peaked, in terms of its harder pricing.

For Jurecka, the expansion into cat can easily be reduced, should pricing soften below the levels deemed necessary to hold onto this business.

“In a softening market, we would of course deliberately decrease it again,” he explained. “Then obviously be lower, when it comes to exposure, but also in relative terms when it comes to our risk budget.”

Here, Munich Re’s use of retrocession becomes important and with the company closing on a new $300 million US named storm catastrophe bond today, the largest cat bond it has ever sponsored, the reinsurer perhaps has additional ability to grow that peril category at the mid-year renewals.

Jurecka commented, “As a reminder, these risk budgets are peril-by-peril for us, and obviously they depend on the capital we have, and obviously retro plays a role and retro is different from one peril to the other, so also differently reflected in the various budgets.

“So, it’s a very detailed and sophisticated framework, and we are not simply just expanding the risk limits or the risk budgets, but we are managing to optimise our portfolio within the boundaries of these budgets.”

Read all about Munich Re’s new catastrophe bond in our Deal Directory.

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