Our answers to todays challenges: Cycle management, diversification - PowerPoint PPT Presentation

Image: used under license from Shutterstock.com Our answers to today’s challenges: Cycle management, diversification and innovation Torsten Jeworrek, Anthony Kuczinski, Thomas Blunck Monte Carlo, 14 September 2014

Agenda Global reinsurance landscape Torsten Jeworrek Solutions for the US market Anthony Kuczinski Munich Re innovations Thomas Blunck Key takeaways Torsten Jeworrek Cycle management, diversification, innovation; Monte Carlo 14/09/2014 2

Global reinsurance landscape Competitive reinsurance landscape requires strict cycle management Availability of alternative capital 1 US$ bn Cyclical challenges Low interest rates Largely driven 59 by scarcity of + 50 investment Low inflation 22 opportunities in + the low-interest- 2009 2010 2011 2012 2013 1H2014 rate environment Benign claims experience Direct impact Indirect impact Abundant excess capital in Most notable in US nat cat Accelerator for price competition primary insurance and XL business among some traditional reinsurance for quite a few reinsurers  Short tail – predictable years now  capital deployment Fight for market share   External models Softening terms and available – know-how conditions without infrastructure  Higher retentions, also driven Spill-over effects as less by global players centralising diversified players expand their buying programmes business to other areas and perils 1 Source: Aon Benfield, Munich Re Cycle management, diversification, innovation; Monte Carlo 14/09/2014 3

Global reinsurance landscape Moderate reinsurance premium growth, stronger growth in primary insurance expected Global premium development from 2007–2013 / 2014e–2016e €bn P/C RI: Ceded premiums 2013 P/C RI and PI real growth rates (CAGR) RI PI Africa/Middle East (5%) 07–13 14–16 07–13 14–16 Latin America 14 10 Europe -1% 1% -1% 2% (7%) Europe (36%) 66 North America -1% 1% -1% 2% Total 43 ~ 182 = 100% Asia Pacific 2% 3% 6% 5% Latin America 7% 4% 8% 5% 49 Africa/Middle 3% 5% 4% 6% Asia Pacific North America East (25%) (27%) Total 0% 2% 1% 3% Source: Munich Re Economic Research Cycle management, diversification, innovation; Monte Carlo 14/09/2014 4

Global reinsurance landscape Diversification and specialised risk expertise for complex tailored solutions in focus Major reinsurance market movements Growing wealth and increasing insurance density Abundant capacity from Industrialisation in regions traditional RIs and alternative exposed to nat cat Demand for risk sources transfer becomes Drivers for supply Increasing demand for nat cat Opportunities smarter and more New capital influx with capacity limited appetite (high US challenging property cat layers) Stricter regulatory requirements favour RI solutions Operational Increasing equity of RI as an attractive long-term excellence, insurance players available vehicle for balancing operating diversification and results and as an efficient specialised risk Less diversified RIs under solvency management pressure, further consolidation instrument expertise is key possible Demand for complex, non- standard solutions optimising risk and capital Cycle management, diversification, innovation; Monte Carlo 14/09/2014 5

Global reinsurance landscape Global risk landscape discloses demand for new solutions in the area of (re)insurance Global risk landscape Opportunities for the insurance industry  The growing economy is leading to Technology Environment emerging risks worldwide   Cyber risks Climate change  They derive from the areas of technology,   Energy risks Weather events environment, society and politics   Supply chain risks Water crisis  Global risks can be mastered by means of  Non-damage new insurance solutions to mitigate risk business potentials interruption  High demand for complex tailored Society Politics solutions in the current market environment   Contentious Regulatory  Reinsurance as a trusted partner in diseases changes developing new solutions for worldwide   Rising cost of Global portfolios medical treatment governance failure  Expansion of the boundaries of and nursing care  Political and social insurability needed  Reputational risks instability/conflicts Global threats call for new insurance coverage Cycle management, diversification, innovation; Monte Carlo 14/09/2014 6

Solutions for the US Market US: Servicing the largest (re)insurance market with the full range of products and distribution channels US the largest (re)insurance market Full range of products and in the world distribution channels US premium volume P/C 2013 €405.7bn US P&C market €43.5bn Primary insurance Reinsurance Munich Re US portfolio: GWP P/C 2013: €5.7bn 2 Profitable business in a highly competitive market 1 Managing General Agency Cycle management, diversification, innovation; Monte Carlo 14/09/2014 7 2 Incl. business from Munich Re Risk Solutions

Solutions for the US Market Capital relief transactions: Solutions for clients to maintain their rating CRT solution Which risks are covered? Potential benefits for the client?   Business (multi-line) Multi-year surplus relief   Volatility (catastrophe) Catastrophe relief (limited)   Financial (rating/solvency) A.M. Best rating maintained at A- / downgrade prevented Image: used under license from Shutterstock.com Munich Re Underwriting know-how, financial analysis and catastrophe modelling strength Target Balance sheet challenges caused by increased natural hazard volatility and man-made severity risks clients Multi-year, variable whole-account net quota share treaty with various options, depending Innovation on the development of the business result (e.g. sliding-scale commission, capped cat limits, commutation options) Cycle management, diversification, innovation; Monte Carlo 14/09/2014 8

Solutions for the US Market Inland low-hazard flood reinsurance fills important coverage demand Homeowners flood endorsement Which risks are covered? Potential benefits for the client?   Inland flood risks – no Atlantic Differentiator in product coastal counties offering vs. competitors   Low-hazard flood only Fills important gap in  No prior flood experience coverage, thus mitigating  Only homes built after 1975 claims issues  Low-limit/low-premium/opt-out model Image: used under license from Shutterstock.com  Reinsurance client relationships, actuarial and catastrophe management expertise Munich Re  American Modern expertise on forms, filing and claims handling strength  Hartford Steam Boiler’s historical success with “private label’ operational model  Regional clients with no Atlantic coastal county exposure Target  Avoidance of Atlantic coast in order to prevent correlation with Atlantic Hurricane budget clients scenarios  By leveraging the combined strengths of reinsurance and specialty units, Munich Re Innovation America Inc. is uniquely positioned to offer premium flood cover and to fill an important market need Cycle management, diversification, innovation; Monte Carlo 14/09/2014 9

Solutions for the US Market Adverse loss development covers – Protecting clients through whole account Whole-account adverse loss development cover Which risks are covered? Potential benefits for the client?   All lines of business written by Protection of financial rating the company from potential downgrade   Predominantly workers’ Control of earnings volatility compensation and casualty from legacy portfolio  exposures Capital preservation  Assumed reinsurance portfolio Image: used under license from Shutterstock.com Efficient and agile collaboration between US and Munich experts (dedicated Customised Munich Re Portfolio Solutions Unit, underwriting, claims, actuarial), client-centric focus, long-term strength trading relationship and in-depth portfolio knowledge enables quick execution for client Target Companies in need of capital and/or ratings protection due to adverse loss development from legacy exposures, specific lines of business and/or classes clients Reinsurance structure that provides significant capacity for liabilities dating back 50 years Innovation and consultative discussion on rating-agency impacts Cycle management, diversification, innovation; Monte Carlo 14/09/2014 10

Solutions for the US Market Munich Re in the US: Profitable business in a highly competitive market  US market most affected by alternative capital Situation  Highly competitive, sophisticated and mature market  Cycle management and strict underwriting is key Objective  Diversification more important than ever  Balanced book in reinsurance and specialty insurance  Stability in core reinsurance and growth driver specialty Munich Re insurance  Strong position in tailor-made reinsurance solutions Cycle management, diversification, innovation; Monte Carlo 14/09/2014 11