Christoph Jurecka, Chief Financial Officer (CFO) of global reinsurer Munich Re, said this morning that he expects property catastrophe reinsurance rates, overall, to be flat on average at the January 1st, 2025, renewals, despite the elevated level of catastrophe activity in the third quarter.
Speaking after the release of the company’s third quarter and first nine months 2024 financial results, Jurecka commented on the outlook for property cat pricing at the upcoming January renewals and beyond.
He explained that despite the hurricanes in the US during the third quarter and so far this quarter, and the flooding in parts of Europe in both periods, Munich Re doesn’t expect the market to continue to harden significantly, but also doesn’t foresee any softening at this point.
“Now, looking at the cat events, obviously, the discussion is always a different one in areas which have been affected by cat events. And therefore, I think for 1.1 renewals, which is also a very relevant and important date, for example, in Europe, the European floods will 100% be part of the conversation the reinsurance industry will have with their clients,” said Jurecka.
“And, similarly, when it comes to the next US renewals, the hurricane events as we see them, and we saw them this year, and the season is over, but there’s still activity, so this will also be part of the conversation,” he added.
Of course, there were markets where the cat activity was very limited, so overall, on average, Munich Re “would expect prices to be on a plateau” at the 1.1 reinsurance renewals, explained the CFO.
It’s going to be very interesting to see how property cat rates trend at the January 2025 renewals. Prior to hurricanes Helene and Milton, and the significant flooding in parts of Europe, the expectation was for prices to come down somewhat when compared with the Jan 2024 renewal. Now, though, commentary from insurers, reinsurers, brokers, and analysts has shifted, with some anticipating rates to be flat and others projecting price increases. Undoubtedly it will vary by region and line, but overall, the expectation from Munich Re is that globally, rates will be flat.
Of course, the year isn’t over and so there’s a chance for more cat activity to have an impact on property cat reinsurance rates at 1.1, which has a European focus, and also the US renewals later in the year.
Today, Munich Re announced above-average natural catastrophe losses of €1.4 billion in the third quarter, up from €535 million last year. The largest single claims event for the firm was hurricane Helene at a cost of €500 million, with a similar cost driven by three loss events in Canada together. Regarding hurricane Milton, which made landfall in Florida in October, the CFO said today that while losses to the firm will be significant, they are projected to be less than those from Helene.
Explaining why this is the case, Jurecka highlighted the path of Helene, describing it as not in itself a Florida event, but an event which started in Florida but then covered the Carolinas and went into Georgia as well.
“And there, obviously, our exposure is very much different compared to if you look at Florida only, in particular also on the GSI side,” said the CFO.
GSI, the firm’s Global Specialty Insurance arm, assumed roughly 50% of the total Helene loss, with the reinsurance segment taking the other 50%, explained Jurecka.
“And therefore, the difference between Helene and Milton is so significant, because for Milton, we would expect the GSI claims to be significantly lower, very much significantly lower than what we have for Helene,” he explained.
During the call, Jurecka was also questioned on whether Munich Re is comfortable with the nat cat share of its P&C portfolio.
“Yes, we feel comfortable with the exposure we have, given the pricing level where we currently are. So, this is an attractive environment to be in the cat space. But as soon as the market would turn significantly, obviously, we would be willing to give up also significant portions of that book,” he said.
“As I mentioned before, following also what’s happening with climate change and also this higher volatility you’re mentioning, or frequency, however you would call it, obviously prices will have to follow, not only on the reinsurance side, but also on the primary insurance side. Otherwise, the entire industry would not be able to cover risks out of those perils.
“And so, therefore, I think the development over the last year was quite healthy, prices moved up. But I think depending on how the development will be going forward, potentially there’s need for more. We’ll see.
“Again, currently, we expect prices to be on the plateau level globally, but in areas where you have particularly high losses, it will be very much part of the conversation when it comes to the renewals. But all in all, due to that mechanism, and looking at our long-term profitability in cat business, we very much feel comfortable, by the way, not only in reinsurance but in GSI,” he added.
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