The corona crisis and the global series of natural disasters affect insurance companies in two ways. The high damage is offset by higher demand and rising prices.
The flood disaster in Europe and the many corona victims are costing reinsurer Munich Re dearly. Nevertheless, CEO Joachim Wenning was convinced on Tuesday that the Dax group will make a profit of 2.8 billion euros in the current year as planned.
However, the corona deaths in the USA as well as in India and South Africa will burden the group in the life insurance sector twice as much in 2021 as previously thought. The flood disaster in Germany and neighboring countries in July could probably hit the Munich-based company with around half a billion euros.
Because of the corona-related deaths overseas, the board expects a burden of 400 million euros in 2021 – twice as much as previously thought. But on the other hand, the company recorded good new business, both in reinsurance and with the Düsseldorf subsidiary Ergo. “We expect record sales of 58 billion euros this year,” said CFO Christoph Jurecka when presenting the final figures for the second quarter.
Apart from the corona deaths, the burden of the pandemic is much lower this year than in the first crisis year 2020. CEO Joachim Wenning put the expected total costs of the virus for the Munich-based company at almost four billion euros in both years, including 3.4 Billions last year. These include payments for canceled events.
Natural disasters also cost the company dearly, with costs increasing by a good fifth to 203 million euros in the second quarter compared to the same quarter of the previous year. This does not include the devastating floods in July because they fall in the third quarter.
Wenning and Jurecka anticipate that the flood damage caused by the storm “Bernd” in Germany, Austria and other neighboring countries will cost Munich Re and Ergo an amount in the mid three-digit million range. The German insurance association GDV estimates the insured damage in Germany alone at 4.5 to 5.5 billion euros.
As already known since July, the group achieved a net profit of 1.1 billion euros in the second quarter, around 91 percent more than a year earlier. High claims reserves as a result of the Corona crisis had dragged the result sharply down.
In the meantime, reinsurance coverage is becoming more expensive for primary insurers like Allianz or the Italian Generali group. When it renewed its property and casualty contracts in July, Munich Re said it was able to get around two percent higher prices on average, adjusted for risk. In particular, contracts in North and South America, Australia and with global customers were renewed.
For the major renewals at the turn of the next year, Munich Re expects a further twist in prices in property and casualty reinsurance.
Jane Stock is a technology author, who has written for 24 Hours World. She writes about the latest in technology news and trends, and is always on the lookout for new and innovative ways to improve his audience’s experience.
