Munich Re’s board member Torsten Jeworrek announced contract rates should rise for the renewal period of January 2012 when compared to 2011.
For instance, rates for reinsurance policies covering natural disasters, offshore energy and motor will see increases while rates in some other commercial and private business lines will remain flat, Jeworrek said at the company’s annual press conference in Monte Carlo, which was webcast.
Global reinsurers, brokers and ratings agencies are gathering this week in Monte Carlo to discuss current developments for rates that reinsurers are asking from their customers, the primary insurers. The world’s largest reinsurers are also discussing the latest trends for the sector. This year, the annual gathering, which gets kicked off Sunday when international credit debt ratings firms present their outlook for the sector, coincides with the 10th anniversary of the 2001 terrorist attack on the World Trade Center.
Rates for policies covering natural disasters in the U.S. have recently increased by 10%, and Munich Re expects that to continue, Jeworrek said.
Traditionally, reinsurance policies for Europe and some parts of Asia are renewed Jan. 1, which is also the renewal date for most industrial companies.
Policies covering Japan and Korea are renewed April 1; and policies for parts of the U.S., Australia and Latin America are renewed July 1.
Jeworrek said Munich Re is mulling changes to policies covering contingent business interruption that was caused by natural disasters, such as the earthquake, as one of the lessons learned from the earthquake and subsequent tsunami that hit northern Japan in March.
The events in Japan –for which insurers could face a bill up to $39 billion according to risk-modelling firm Eqecat– have shown a high accumulation of contingent business interruption risks due to numerous supply chains to Japan from carmakers and auto parts makers in Germany, Europe and the U.S., Jeworrek said, adding that the loss from business interruption is still unknown.
Munich Re is considering putting loss limits in place for business interruption caused by individual natural disasters, so that the policyholder would make suppliers replaceable or share a higher burden of the loss, Jeworrek said. Munich Re won’t cancel any policies and would like to get third-party opinions about the proposed policy change before introducing it, he said. The change would require a transition period of 12 to 18 months.
Munich Re also said it is developing a new software aimed to help recognize such interaction earlier.
Frankfurt, September 11, 2011 (Dow Jones)
