Climate change focuses on expanding reinsurance: Munich Re
September 12, 2022
Munich Re says it is cultivating new high-resolution risk models for regional events such as flash floods, as the insurance industry faces the task of adapting risk management to the reality of the impacts of change climatic.
“Given the losses incurred, it is necessary to develop a deeper understanding of these events now so that better precautions can be taken,” said Munich Re board member Thomas Blunck.
“Furthermore, a combination of greater prevention and a higher level of insurance coverage is important, with pricing commensurate with risk as a precondition.”
Munich Re predicts that substantial business potential will arise from the demand for insurance generated as businesses transition to climate neutrality. The group’s Green Tech Solutions unit has developed warranty coverage for hydrogen production plants, with green hydrogen set to play an important role.
Currently, extreme inflation, rising interest rates and falling assets pose challenges to the entire insurance industry, alongside the burdens of war in Ukraine, according to the company.
European reinsurers have been particularly hard hit as the challenges are overcome by the strong appreciation of the US dollar against the euro.
Overall reinsurance capacity has shrunk, with short-term shortages emerging in some segments such as catastrophe cover in Florida, while rising demand underpins rate tightening
According to Munich Re, the global P&C reinsurance market will grow at least as strongly as the primary insurance market through 2024.
The group’s economic research department estimates that the reinsurance industry will grow by 2-3% globally between 2022 and 2024, adjusted for inflation, with the strongest growth likely to be in Latin America at 4–5%