Swiss Re Insurance-Linked Fund Management

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Munich Re sees strong Q3, but cites “high major-loss expenditure”


Reinsurance giant Munich Re said this morning that it expects a strong third-quarter result and to beat its full-year forecast, despite the impact of a “high major loss expenditure.”

Munich Re signMunich Re expects its consolidated result for the third-quarter of 2019 will be around €850 million.

This despite the expectation of catastrophe losses impacting its results, for which Munich Re states it expects a “high major-loss expenditure.”

Natural catastrophe events such as hurricane Dorian and Japanese typhoon Faxai are likely to dent the underwriting result for Munich Re, while other catastrophe events such as typhoon Lekima, severe weather impacts in the United States and Europe, as well as man-made loss events including the space rocket explosion in the UAE and satellite crash in China, are all likely to have taken their toll.

Analysts have already been saying that they expect the major reinsurance firms to exceed their catastrophe budgets for the third-quarter, as our sister publication Reinsurance News reported this week.

Munich Re isn’t giving anything away on the scale of the major loss impacts it expects, but they are likely to be at least around the level it typically budgets for.

Munich Re said that its strong Q3 result is expected thanks to “good operational performance, strong currency gains, and a very good investment result.”

Quite how good the overall underwriting result in property and casualty (P&C) reinsurance will be remains to be seen when the results are announced in November.

It’s also not clear at this stage how much, if any, retrocessional support Munich Re will have called on after its Q3 major losses.

There is a chance that, if the major loss burden is high enough, there could be some losses passed on to reinsurance sidecars and third-party capital vehicles such as its Eden Re.

But of course that is what these vehicles are there for, to participate in Munich Re’s underwriting performance, sharing in the profits when losses are scarce and bearing some of the burden when loss activity rises.

Munich Re said it is on target to beat its consolidated result of €2.5 billion for full-year2019, despite there still being considerable uncertainty regarding developments in major losses and the capital markets over the remainder of this year.

That will be an encouraging statement for investors in the company and perhaps its third-party reinsurance capital partners, especially as this statement comes a week after typhoon Hagibis’ impacts in Japan.

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