04 The founding of Munich Re

Carl Thieme is determined to set up a new reinsurance company, despite the poor state of the economy and wave of insurance bankruptcies. He sees the opportunities that industrialisation offers and designs a corporate concept that is destined to revolutionise the entire industry. And he finds partners who have the enthusiasm, ingenuity and funds to significantly contribute to Munich Re's success.

Bad times for insurers

Picture it. Munich, 1880. The German insurance industry is foundering. Fire and marine insurance, the main lines, are performing poorly. A host of new companies succumb to the crisis. Bad times for establishing a reinsurance company. Yet Carl Thieme, Thuringia's general agent and chief representative for the Kingdom of Bavaria, thinks otherwise. The need for risk cover will grow with the coming of the industrial age and the internationalisation it will entail. Besides, over two-thirds of the approximately 45 million marks of reinsurance premium are flowing into the neighbouring countries. Most of the German reinsurers do not inspire a great deal of confidence. They are very small and tied to primary insurance companies. Thieme believes these companies will not be able to rise to the challenges of the future. The reinsurance company he has in mind will be independent and free to select its own business. It will write treaties in a variety of regions and for different classes of business, thus spreading the risk. Its treaties will be standardised to reduce the amount of work involved. And his company will stress the value of partnership between the primary insurer and reinsurer. This is the reinsurer of the future that Thieme envisions.

A vision becomes reality

Thieme needs capital and looks for partners who believe in his idea. People like Baron Theodor von Cramer-Klett, for instance, who is one of Bavarian industry's leading lights. His engineering works are the Nuremberg part of today's Maschinenfabrik Augsburg Nürnberg, MAN for short. Like Thieme, Cramer-Klett recognises the opportunities of the industrial age, has helped to set up a number of new banks in order to secure the financing of his companies and has good contacts. He asks Wilhelm Finck, his financial adviser of many years and, like himself, a co-owner of Bankhaus Merck, Christian & Co. (later called Merck, Finck & Co.), to look into Thieme's idea. Suddenly, there are three of them. Their conviction is soon shared by Finck's former colleague Phillip Schmidt Polex and Friedrich von Schauss, head of Süddeutsche Bodenkreditbank. The founding team obtains the legal assistance of Hermann Pemsel, royal advocate and attorney to Messrs. Cramer-Klett and Finck. The team is finally complete.

On 6 March Bankhaus Merck, Finck & Co. and Dr. Pemsel request approval for founding Munich Reinsurance Company from the Bavarian State Ministry of the Interior. Approval is granted on 15 March. On 3 April, Notary Public Dr. Hausmann draws up the Articles of Association in Munich. Together with the companies Klett & Co., Merck, Finck & Co. and Darmstädter Bank, the founders raise an opening capital of 3 million marks.

19 April marks the day the Company is officially entered in the Commercial Register, and on 23 April Thieme secures his first treaty: the Supervisory Board approves conclusion of a fire reinsurance treaty with Thuringia. Every treaty is subject to the Supervisory Board's approval. Much as everyone believes in the enterprising Thieme, they still consider it important to vet what he is doing and, if necessary, rein him in.

The very first offices

In April 1880, Carl Thieme leases two offices in what was formerly the Birnbaum brewery building on Fingergässchen ("Finger Alley"). Though typical for Munich, the Company's first address doesn't exactly sound very representative. Fortunately, Fingergässchen is soon widened, and the street and building are given more apt names. Munich Re is now domiciled in the Börsenbazar (stock exchange building) on Maffeistrasse 1 and Thieme employs four office clerks: Messrs Halder, Kinderle, Fiedler and Ramstetter. This young and relatively inexperienced team is joined on 1 July 1880 by a true professional. His name is Carl Schreiner. He is 26 years old and has worked for the reinsurer Rheinisch-Westfälische Rück for the past six years. He will expand Munich Re's business overseas in a matter of a few years. In 1890, Carl Schreiner establishes the "Foreign Department" in London and, in 1912, the "First Reinsurance Company of Hartford", which was probably the first independent reinsurance company in the USA.

Number one in five years

In Munich Re's first year of business, the Supervisory Board approves 33 treaties with 27 cedants. Seven of them are from Austria, Denmark, Sweden, France, Russia and Switzerland. A treaty with a Norwegian marine insurer is rejected because of "fundamental reservations". Premium income in the first year of business totals 1.05 million marks - a major achievement for a newly founded company that does not yet have any references and must still earn its clients' trust. A mere five years later, Munich Re is the world's largest reinsurer.