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Munich Re Aims for Stable Rates in January Renewals

Munich Re Branch
Pedestrians pass the "Walking Man" sculpture outside a Munich Re branch in Munich. Photographer: Guenter Schiffmann/Bloomberg

Sept. 8 (Bloomberg) -- Munich Re, the world’s biggest reinsurer, said it expects stable rates for its property and casualty reinsurance at January price negotiations.

“Prices will remain largely stable, chiefly due to the still comparatively low interest rates,” for proportional business in which a quota of claims and premiums is shared with a primary insurer, the company said in a statement in Monte Carlo today. The Munich-based company “predicts no significant changes in prices and conditions” in other business, it said.

Reinsurers such as Munich Re, Swiss Re Ltd. and Hannover Re are meeting with brokers and their clients, primary insurers, in Monte Carlo to negotiate terms and conditions of next year’s property and casualty policies. The industry is under pressure to shore up earnings hurt by low interest rates and as near-record capital available for coverage weighs on prices.

“There is pressure, we know it,” Torsten Jeworrek, who heads Munich Re’s reinsurance business, said at a press conference in Monte Carlo today. “The general discipline to keep current pricing levels in place will probably remain.”

Executives from Allianz Re, the reinsurance arm of Germany’s Allianz SE, and the international reinsurance business of Berkshire Hathaway Inc. said on Sept. 6 they expect prices to be unchanged or even fall slightly next year. Terms and conditions of the treaties might also see some deterioration, they said.

More Capital

The reinsurance industry had capital of $510 billion at the end of June, just below a record $515 billion three months earlier, according to Aon Benfield, the reinsurance broker of Aon Ltd., which mediates deals for primary insurers. Capital inflows have been driven by new entrants, such as hedge and pension funds.

Talks with customers and brokers will continue next month in Baden-Baden, Germany. Allianz SE, Axa SA and other primary insurers buy reinsurance to help them shoulder claims from costly events such as natural disasters.

Hailstorms that hit parts of Germany at the end of July are expected to cost Munich Re 180 million euros ($237 million), while it expects total insured losses in the range of 1.5 billion euros, Jeworrek said.

The market would need a “very large loss” for price increases to happen, a disaster with claims in excess of $50 billion, said David Priebe, vice chairman of Guy Carpenter, the reinsurance broker of Marsh & McLennan Cos., said in Monte Carlo.

Munich Re, Swiss Re and Hannover Re are among reinsurers typically renewing about two-thirds of their annual property and casualty contracts in January. Munich Re said on Aug. 6 prices declined 0.9 percent in July renewals, while Zurich-based Swiss Re, the second-biggest reinsurer, reported a drop of 5 percent.

To contact the reporter on this story: Oliver Suess in Munich at osuess@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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