Munich Re retains “vast majority” of cyber business after war exclusion

Munich Re was able to hold on to the “vast majority” of its cyber business after completely excluding cyber war from its primary insurance and reinsurance books, according to management board member Stefan Golling.

Speaking at this year’s Monte Carlo Rendez-Vouz, Golling reiterated that Munich Re has now excluded cyber war entirely from both its primary insurance and reinsurance portfolios.

Last year he had said that the German giant would be prepared to give up its entire book of cyber business because it does not think it can insure a cyber war.

“I’m happy to report that we at Munich Re have, in the meantime, excluded cyber war entirely from our primary book as well as our reinsurance book.

“We also had to give up some business, but you can also see we could retain the vast majority of our business, and this is estimated for the year end [to be] about $1.8bn in cyber premium, [so] we are still the biggest net cyber underwriter in the market,” Golling commented.

Munich Re’s total cyber gross written premiums are set to fall from $2.1bn in 2023 to an expected $1.8bn for 2024. This is the second year in a row in which Munich Re’s overall cyber premiums have fallen, with 2022 GWP having totalled $2.2bn for the class.

Speaking to The Insurer in Monte Carlo, Munich Re’s senior executive manager for the Lloyd’s and Bermuda markets Claudia Schwimmer noted that the loss of market share associated with cyber war exclusions was stabilising.

Sources said Munich Re’s slight drop in market share may also be related to an increased number of non-proportional products in the cyber market, while the German reinsurer prefers proportional cover.

Despite its drop in premiums, Munich Re remains the industry’s largest cyber underwriter, with its stance on cyber war part of its goal to create a sustainable market.

And Golling pointed towards CrowdStrike as an example of why it has attempted to create a “clear” approach to war wordings.

“Accumulation management, transparent coverage, as well as clearly defining the limitations of your own risk appetite and also of the coverage out there are absolutely important to continue making cyber a sustainable business,” he said.

There was initial confusion over what was covered in the wake of the CrowdStrike outage, with Ariel Re’s Dan Carr noting that discrepancies in coverage between primary insurers is a significant concern for reinsurers.

Growth expected to continue

Cyber growth remained high on the agenda for most of Europe’s largest reinsurers at this year’s Monte Carlo.

Golling highlighted that insurance penetration in the cyber market remains low.

“With the insurance density in cyber still being very low, it will not surprise you that we also expect their further growth in the market, and I would expect Munich Re to grow in cyber,” he said.

Swiss Re’s P&C reinsurance CUO Gianfranco Lot agreed that cyber is a line of business that is expected to grow significantly over the next couple of years, estimating an annual growth rate in the “significant double digits”.

However, he said that in real terms this growth was nowhere near where it should be, with a temporary contraction in market premiums related to a push for profitability.

Scor CEO Thierry Léger agreed that a lack of capacity was limiting the market’s ability to take advantage of what he described as “limitless” opportunities given by cyber’s low insurance penetration.

Yet he still underlined his expectation that the market will be able to grow at 10-15 percent for the coming decades.

Hannover Re’s cautious appetite

Hannover Re positioned itself more cautiously, offering insight into the reasons why the cyber market has struggled to source adequate capital to match demand.

Cyber and digital business managing director Stefan Sperlich said: “I think as an industry, we have question marks around price adequacy on the primary side in the absence of large losses. CrowdStrike will not help us to test if price adequacy is at a level that it needs to be.”

Nonetheless, the Hannover Re cyber lead emphasised that the reinsurer maintained an appetite for general cyber.

“We have appetite, we have capacity to deploy, but we are cautious and will wait to see how certain features develop.”