Global reinsurance giant Munich Re has said that it feels well prepared for a more competitive P&C reinsurance market environment, touting the significant diversification within its business and commenting on its ability to manage the cycle this morning., citing an expectation that its reinsurance return on equity (ROE) would land at over 18% and its earnings per share will grow annually by over 8% on average by the end of 2030.This morning, at a media briefing, Munich Re executives were keen to highlight the ability of this globally diversified and line-of-business diversified insurance and reinsurance player to manage the softening cycle being seen in P&C reinsurance.While in a press announcement, the reinsurer drove home its ability to manage cycles through having both reinsurance and primary insurance operations.

It’s indicative of a marketplace where competitive pressures are rising, as we typically see cycle management increasingly highlighted by the largest reinsurers, at phases where reinsurance softening is accelerating as we’re seeing today.Munich Re highlighted what it calls its “unique combination” of reinsurance and primary insurance, with an expectation that sustained earnings growth in life and health reinsurance, global specialty insurance and its ERGO arm will all offset “possible fluctuations in P&C reinsurance business.” These areas of the business will help “support cycle management in P&C reinsurance” and further drive growth for the Munich Re business, the company explained.Specifically on P&C reinsurance, the company said this morning, “Munich Re is well prepared for a more competitive environment and is aiming for the highest profitability over the market cycle compared to its competitors.

This is supported by our strong market position with sustained high demand for reinsurance cover, particularly in the area of natural catastrophes, a portfolio that is less price-sensitive and more balanced than those of our competitors, and the correspondingly high degree of flexibility and effectiveness in cycle management.” Munich Re also touted “the broadest business model with the strongest diversification in the industry” that allows the company to keep aiming higher even in a more competitive market environment.Joachim Wenning, CEO and Chair of the Board, said, “Now more than ever, Munich Re is a financial powerhouse.We are achieving record-breaking results year after year and expect to exceed all financial and non-financial targets of the nearly complete Ambition 2025.

Our net result has become even more stable thanks to the increasing diversification of our earnings drivers.All our stakeholders benefit from our strength, expertise and reliability.” CFO Christoph Jurecka added on the new strategic goals, “Our new Ambition 2030 builds on the factors that made ambition 2025 a success and is based on the motto ‘Outpeak • Outpace • Outperform’.We want to reach even higher peaks in every respect in order to outpace and outperform our peers by 2030.

To do so, we will profitably expand our business in all segments.Our shareholders will enjoy an even greater share of our earnings.Thanks to our solid financial footing, we will be a steadfast partner for our customers, through varying market cycles.

At the same time, we will reduce complexity and combine our market-leading know-how with artificial intelligence to boost our speed.Accordingly, our employees and society as a whole will benefit in a number of ways from a global, modern and innovative company.” Munich Re’s new targets are ambitious, but the reinsurance company is clearly aware of the benefits of its diversified and large business model and how that can help it through the cycle.While companies like Munich Re are likely to increasingly cite competition over the coming year, they will equally tout their ability to manage a softening cycle.

As ever, the question remains over how competitive the large reinsurers will choose to be this time, as in the past competitive tendencies has been a meaningful driver of further softening and erosion of terms, when market shares are being protected.Discipline remains key though.As neither the equity shareholders of the large reinsurers or the investors backing insurance-linked securities (ILS) want to see any return to the mid-2010’s levels of softening and stretched terms.

As well as discipline, the ILS community also has tools at its disposal to assist in managing cycles, especially around how portfolio resilience to cycles can be constructed and maintained.We’re entering a phase of the market where those will come to the fore and we may see more evidence of how some ILS business models differ again, we suspect..All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance can be accessed online.

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