Munich Re, the world’s second largest reinsurer, issued a business update yesterday (press release) in which it reduced its profit forecast for 2020 to €1.2bn due to increased COVID-19 claims. Munich Re did, however, forecast €2.8bn of profits for 2021, which is similar to the 2021 forecast that it issued in March, prior to the impact of the pandemic. Munich Re now estimates total COVID-19 losses of €3.38bn for 2020 (€3.02bn from its Property & Casualty division and €360m from its Life & Health division) and a further €500m in 2021 (€300m from P&C and €200m from L&H).
Alpha comment: this latest total figure of €3.38bn compares to €2.3bn previously announced, an increase of 41%. Munich Re have increased their estimate to account for the second phase of lockdowns and for exposures run into 2021. These updated figures confirm that Munich Re has a major share of the COVID-19 losses, in particular in contingency where Munich Re is one of the largest reinsurers of contingency and event cancellation. Taking the Lloyd’s estimate from May that overall 2020 industry underwriting losses would be c$107bn (as at 30th June 2020) and that 31% of the loss would be contingency, this suggests the contingency element of the global loss is at least $33bn. Munich Re’s estimate of 2020 contingency losses (€1.66bn/$1.96bn) would therefore indicate a 6% share in this segment. As the market leader, we are in fact quite surprised that their COVID-19 number for contingency is not more. What their new COVID-19 figures also show is that, whilst of course subject to much uncertainty, the fact that Munich Re is nonetheless forecasting good profits demonstrates the abundance of current opportunities in the market.