Munich Re lifts 2020 COVID-19 loss above $4bn, expects ~$720m more in 2021

Global reinsurance giant Munich Re has lifted its estimate for losses from the COVID-19 pandemic to more than US $4 billion for 2020, as the reinsurer increased its estimate significantly to account for fourth-quarter losses.

In addition, Munich Re has announced that it is expecting another roughly US $720 million of COVID-19 losses to be realised in 2021 as well.

This morning Munich Re has forecast that despite the significant losses from the COVID-19 pandemic, it still expects to make a profit of around EUR 1.2 billion for 2020.

In addition the company expects to be back on track in 2021, despite the continued impacts from COVID-19 losses that it expects to suffer, with a forecast for around EUR 2.8 billion of profit for next year, which is aligned with targets it had set prior to the pandemic breaking out.

Christoph Jurecka, Munich Re’s CFO commented, “We expect to generate a profit of clearly above 1bn € this year. The pandemic has naturally had a considerable impact on our result. But the burdens arising from COVID-19 are financially manageable for Munich Re. By covering insured losses totalling billions, we are playing a substantial role in helping the economy and society cope with the pandemic.

“Our business is clearly on track. In the absence of COVID-19, we would have been able to achieve our original result target for 2020. Thanks to our strong balance sheet, we are in a very good position to exploit current market opportunities. In the coming year, we plan – despite anticipated further COVID‑19 losses – to meet the profit target of €2.8bn as envisaged prior to the pandemic.”

Munich Re said today that EUR 3.4 billion (US $4.07bn) is now its expected reinsurance division loss from COVID-19 for 2020, life and health reinsurance accounts for EUR 360 million and property-casualty reinsurance for slightly more than EUR 3 billion.

Of this, contingency reinsurance is the largest contributor at €1.66bn, while property/business interruption covers account for €965m, D&O/workers compensation €200m, credit €170m and marine/aerospace €25m.

For 2021, Munich Re is now forecasting reinsurance claims from COVID-19 of around EUR 500 million, plus another negative impact of around EUR 100 million to its primary ERGO division, for a total negative impact of around US $720 million.

EUR 300 million of the 2021 COVID-19 losses are expected in P&C reinsurance, roughly broken down as contingency €200m, property/business interruption €50m and credit insurance €50m.

Life and health reinsurance anticipates another EUR 200 million of COVID-19 losses in 2021.

Despite all of the impacts of the pandemic, Munich Re forecasts profits of EUR 2.8 billion for 2021, with further growth expected as the reinsurer targets a record group premium income of EUR 55 billion for next year.

“Given the considerable price increases for reinsurance cover, Munich Re will continue to spur its dynamic and profitable growth in reinsurance,” the company explained.

Munich Re had previously said that it did not expect its reinsurance sidecars, or its retrocession partners, to pick up much in the way of its COVID-19 losses. As the total rises, it will be interesting to see whether that remains true.