MUNICH RE Monte Carlo 2020
Re | think complexity - Be better prepared for systemic risks
7 September 2020
Torsten Jeworrek, Stefan Golling
Image: Westend61 / Getty Images
Agenda
1 | 2 | |||
Insurance | Systemic risks | |||
industry outlook | on the rise | Pandemics | ||
Torsten Jeworrek | Stefan Golling - | |||
Torsten Jeworrek | Cyber | |||
Climate change
Images: 1 zhangshuang / Getty Images 2 Andrew Brookes / Getty Images | |||
3 Song_about_summer / Adobe Stock | Virtual Monte Carlo Media Conference | 7 September 2020 | 2 |
1 Insurance industry outlook
Insurability of risks
Assessable - random - independent
insurable
Fire
Political
risks
uninsurable
Liability | Health | Motor | ||
Cyber | Life | |||
Terrorism | NatCat | |||
Pandemic
Critical | War | ||
infrastructure | |||
NBCR | Nuclear | ||
Terrorism | Cyber war | ||
hazards | |||
Virtual Monte Carlo Media Conference | 7 September 2020 | 3 |
1 Insurance industry outlook
Update on recent loss events
COVID-19-relatedlosses with
reduced momentum since 30 June
Hurricanes Hanna, Isaias and
Laura (July and August):
Munich Re anticipates a low triple-
digit-million euro amount in claims
Explosion in Beirut: Claims in a
low three-digit-million euro
range expected
California wildfire season is
currently still ongoing: Impact for Munich Re currently not estimated
to be material
Virtual Monte Carlo Media Conference | 7 September 2020 | 4 |
1 Insurance industry outlook
Primary insurance and reinsurance development
Global premium development 2017-2019/2020e-2022e
P-C RI: Ceded premiums 2019 | P-C RI and PI real growth rates (CAGR) | ||||||||||||||
RI | PI | ||||||||||||||
17-19 | 20-22 | 17-19 | 20-22 | ||||||||||||
Europe | €85bn | 31% | 2% | 1-3% | 2% | 1% | |||||||||
North America | €94bn | 34% | 8% | 2-4% | 3% | 2% | |||||||||
Asia Pacific | €66bn | 24% | 6% | 4-6% | 4% | 4% | |||||||||
Latin America | €15bn | 5% | 2% | 0-2% | 0% | 0% | |||||||||
Africa/Middle East €14bn | 5% | 1% | 2-4% | -1% | 2% | ||||||||||
Total | ~€274bn | 100% | 5% | 2-4% | 3% | 2% | |||||||||
Virtual Monte Carlo Media Conference 7 September 2020 5 |
1 Insurance industry outlook
Insurance capacity stable overall
Alternative capital re-evaluating investment case
Dedicated reinsurance capital
Traditional RI capital (US$ bn)
320 340 332 345 345 341
358 365
Traditional market
- Traditional reinsurance capital showing overall stable development despite recent COVID-19 impact
- Capital markets highly volatile in 2020 but recent market recovery
- Capital increases by existing market players and new players entering the market
- Withdrawal of capacity in some lines of business
Non-traditional capacity/Alternative Risk Transfer ("ART")
- Market for Alternative Risk Transfer (ART) remains stable at US$ 90bn+ 1
- Loss creep, unmodelled perils and uncertainty around COVID-19 leading to investors expecting higher returns
- Recent tendency to lock up capital in illiquid products driving interest in more transparent, liquid Cat bond market
- "Flight to quality" of ART capacity supporting our retro programme
1 Total of reported top 50 fund NAV plus estimated non-reported capital
Source: AM Best, Guy Carpenter, Munich Re | Virtual Monte Carlo Media Conference | 7 September 2020 | 6 |
1 Insurance industry outlook
Industry's price development favourable
Insurance and reinsurance indices showing upward price trends in recent years
US composite insurance price change1
20%
10%
0%
-10%
US Property Catastrophe Rate-on-Line Index2
220
200
180
160
140
120
2012 2013 2014 2015 2016 2017 2018 2019 2020
Munich Re renewal price changes (%)
2.4
1.8
0.8 | 0.3 | |||||||||
0.2 | ||||||||||
-0.9 | -0.5 | |||||||||
-1.6 | ||||||||||
-2.4 | ||||||||||
2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | ||
1 Marsh Global Analytics 2 Guy Carpenter. Based on 1990 (=100) | Virtual Monte Carlo Media Conference | 7 September 2020 | 7 |
2 | Systemic risks on the rise |
Systemic risks on the rise
Climate change
Pandemics
Global COVID-19
economic losses up to
US$ 12 trillion1
- Source: IMF June 2020
- Compared to baseline levels in February; Source: Carbonblack, April 2020
- Source: C40 Cities, RCP 8.5 "business as usual" scenario
Cyber
Ransomware attacks
increased by
148% in March 20202
~800 million
people live in cities that will be
affected by
sea-level rise
if no action is taken3
Virtual Monte Carlo Media Conference | 7 September 2020 | 8 |
2 | Systemic risks on the rise |
Insurance industry bears significant COVID-19 losses
But there is a huge uninsured portion
insured
uninsured
Personal lines | US$ 30-107bn | Life/Health | ||||
(average US$ 62bn)1 | ||||||
e.g., travel | ||||||
Commercial lines | Non-life | |||||
e.g., D&O, event cancellation, | ||||||
pandemic | ||||||
worker's comp | Life/Health | |||||
loss estimates | ||||||
Financial lines | pandemic loss | |||||
in 2020 | ||||||
e.g., trade credit | ||||||
Non-damage | Risk capital of US insurers |
business interruption | |
would have been consumed within a few |
weeks if BI losses had been insured2
1 Source: Dowling, Artemis, Barclays, BofA, KBW, USB, Lloyd's, Wells Fargo, Goldmann Sachs, Berenberg
2 Source: APCIA | Virtual Monte Carlo Media Conference | 7 September 2020 | 9 |
2 | Systemic risks on the rise |
Munich Re's approach to uninsured pandemic risks
Pandemic risk exceeds capacity of (re)insurance
National pools preferred
Focus on non-damage BI for small and medium-sized businesses
Parametric cover to ensure quick payout
No cover for second wave of COVID-19
Pandemic
Pool
Solutions
The (re)insurance industry can contribute its know-how and infrastructure
Keep it simple: initially
a pool for pandemics only
Assure affordability of cover for SME through government subsidy
Mandatory cover to avoid low take-up rate and anti-selection
Financial support from capital markets to be considered
Virtual Monte Carlo Media Conference | 7 September 2020 | 10 |
2 | Systemic risks on the rise |
COVID-19 significantly affecting cyber risk
Developments underline necessity, potential and complexity of cyber insurance
COVID-19 used in the context of phishing attacks
Changed exposure due
to shift to working from home
Digitisation push
(Online shopping & communication, etc.)
IT security levels lower due to reduced budgets/investments
Accelerated digitisation
- Strong increase in digital solutions
- Raised cyber awareness
- Increase in frequency and severity of malicious attacks
- Increase in frequency of cyber crime losses to be expected
- Hardening of conditions likely
Image: Andrew Brookes / Getty Images | Virtual Monte Carlo Media Conference | 7 September 2020 | 11 |
2 | Systemic risks on the rise |
Current "hot" topics we are addressing
Market | Coverage | |||||||||||||||
topics | Cyber war | COVID-19 | ||||||||||||||
sustainability | ||||||||||||||||
(system failure, | (LMA Cyber | (constant exchange of | ||||||||||||||
(ransomware) | CBI, bricking) | Working Group) | information on developments) | |||||||||||||
Cyber
challenge
Silent | Accumulation and | Technology |
cyber | systemic risk | and insurance |
(comprehensive | (vendor models, | (augmented |
solutions) | insurability) | underwriting) |
Virtual Monte Carlo Media Conference 7 September 2020 12 |
2 | Systemic risks on the rise |
Strong growth expected in cyber insurance market
Cyber is one of Munich Re's main strategic areas
GWP global cyber insurance market1
US$ bn
12 | Digitisation | |
RoW | ||
10 | ||
Claims | ||
8 Legislation | ||
6 | US | |
4 | ||
2 | ||
0 |
2016 2017 2018 2019 2020 2021 2022
GWP Munich Re cyber portfolio
US$ m
700
600
500 | PI | ||||||
400 | |||||||
300 | RI | ||||||
200 | |||||||
100 | |||||||
0 | |||||||
2014 | 2015 | 2016 | 2017 | 2018 | 2019 |
Cyber reinsurer of the year 2017, 2018, 2019 and 2020
1 Estimates by Munich Re | Virtual Monte Carlo Media Conference | 7 September 2020 | 13 |
2 | Systemic risks on the rise |
Climate risks - The clock is ticking
Adaptation and mitigation required
Wildfire
Flood
Tropical cyclones
Drought
Thunderstorm
Global effort
Economic + ecological transformation
Technological push
Virtual Monte Carlo Media Conference | 7 September 2020 | 14 |
2 | Systemic risks on the rise |
Insurance gap still very high in many parts of the world
Decreasing in industrialised countries, unchanged in developing countries
Losses from weather-related natural disasters 1980-2019
US$ bn | Insured losses |
US$ 1,359bn | |
2,000
1,500
1,000
500
0
North | Asia | Europe | Australia/ | South | Africa |
America | Oceania | America |
Overall losses
US$ 4,239bn
Worldwide: Less than 1/3 of losses were insured
Source: Munich Re NatCatSERVICE 2020, in 2019 values | Virtual Monte Carlo Media Conference | 7 September 2020 | 15 |
2 | Systemic risks on the rise |
Solutions to mitigate climate change and strengthen resilience
Initiatives to support the Paris Agreement targets and to adapt to climate risks
Munich Re memberships
Net Zero Asset Owner Alliance
Enabling | Disabling |
ClimateWise
Insurance Development Forum
- Green Tech Solutions
- Investments and partnerships
Munich Re
Solutions
- No new coal
- No new oil sands
- Asset divestments
Climate Action 100+
Resilience
- High risk capacity
- Digital risk assessment tools
- Parametric trigger solutions
Virtual Monte Carlo Media Conference | 7 September 2020 | 16 |
2 | Systemic risks on the rise |
Re | think complexity
Be better prepared for systemic risks
State-backed insurance pools
Pandemics
Cyber | Holistic approach |
Climate change
Technological push and resilience
Images: 1 zhangshuang / Getty Images | 2 Andrew Brookes / Getty Images | ||
3 Song_about_summer / Adobe Stock | Virtual Monte Carlo Media Conference | 7 September 2020 | 17 |
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Disclaimer
Munich Re Group - Münchener Rück AG published this content on 07 September 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 10 September 2020 15:14:05 UTC
