Coronavirus: Impact on Munich Re
The global battle against the coronavirus has not yet been won. Many countries have managed to reduce the number of COVID-19 infections by taking action – at times drastic – to curb the spread of the virus. But the threat of a second wave of infections still looms, and the situation remains precarious. It will not be possible to determine the true extent of the pandemic’s impact on the insurance sector for some time.
As a globally active Group, we are of course observing the progression of the pandemic very closely. Our thoughts are with all individuals and families who have been directly affected by the virus: suffering an illness or indeed losing a family member comes at a much greater cost than any economic loss. Our highest priority is to protect our employees and business partners. That is why we have put in place strict measures to ensure the infection risk is kept as low as possible. The vast majority of our employees have been working from home in the past months. Our business activities have continued to run smoothly, and Munich Re has been there for its clients throughout. Many of Munich Re’s offices have already reopened their doors to a limited number of staff, of course under strict hygiene rules.
Despite the current situation, Munich Re continues to stand on firm economic footing, and will certainly be able to bear the economic consequences of this pandemic. Munich Re’s business model has proven robust – particularly in the current crisis. Accordingly, Munich Re paid its shareholders a dividend of €9.80 per share for the 2019 business year.
However, as communicated on 31 March 2020, Munich Re will not meet its profit guidance of €2.8bn for the whole of 2020, owing to losses from the cancellation or postponement of large events and high levels of uncertainty regarding the further economic and financial impact of the pandemic. In light of this uncertainty, Munich Re is not providing new profit guidance for 2020.
As communicated on 6 August 2020, COVID-19-related losses totalling around €1.4bn were incurred in property-casualty business in the first half of the year. Insured losses derived primarily from the cancellation or postponement of major events. Losses are also being seen or at least anticipated in other lines of business as a result of the economic downturn. In many lines of property-casualty business (e.g. business interruption), it was largely common practice to exclude the risk of a pandemic from insurance cover.
Life and health business was impacted by €100m in COVID-19-related losses in the first six months of 2020 – as communicated on 6 August 2020. Loss expectations going forward will depend heavily on how the fatality figures develop, particularly in North America. While we still cannot fully rule out the possibility of the kind of death toll expected for a 200-year event - this would be equivalent to the claims expenditure associated with a medium-sized natural disaster - many factors currently indicate that the impact of this pandemic will be less dramatic.
We are still observing ongoing high levels of volatility on the capital markets, alongside extremely low interest rates that will persist for the foreseeable future. This affects our solvency ratio, though the impact has been kept within clear bounds through hedging and the broad diversification of our investments. At 211% (as at 30 June 2020), Munich Re’s solvency ratio sits comfortably in the optimum range (175% to 220%) in line with our limit and trigger system. Munich Re continues to rest on a very solid capital base, meeting all requirements, and with its strong balance sheet is a reliable partner for its clients
The losses caused by the coronavirus and the economic downturn triggered by the pandemic will have a significant short-term impact on Munich Re, too. That said, the coronavirus has clearly demonstrated the value of insurance, and this should open up good business opportunities to Munich Re in the medium and long term. We are therefore optimistic for the future.
Munich Re is one of the world’s leading providers of reinsurance, primary insurance and insurance-related risk solutions. The group consists of the reinsurance and ERGO business segments, as well as the capital investment company MEAG. Munich Re is globally active and operates in all lines of the insurance business. Since it was founded in 1880, Munich Re has been known for its unrivalled risk-related expertise and its sound financial position. It offers customers financial protection when faced with exceptional levels of damage – from the 1906 San Francisco earthquake through to the 2017 Atlantic hurricane season and to the California wildfires in 2018. Munich Re possesses outstanding innovative strength, which enables it to also provide coverage for extraordinary risks such as rocket launches, renewable energies, cyberattacks, or pandemics. The company is playing a key role in driving forward the digital transformation of the insurance industry, and in doing so has further expanded its ability to assess risks and the range of services that it offers. Its tailor-made solutions and close proximity to its customers make Munich Re one of the world’s most sought-after risk partners for businesses, institutions, and private individuals.
This media release contains forward-looking statements that are based on current assumptions and forecasts of the management of Munich Re. Known and unknown risks, uncertainties and other factors could lead to material differences between the forward-looking statements given here and the actual development, in particular the results, financial situation and performance of our Company. The Company assumes no liability to update these forwardlooking statements or to make them conform to future events or developments.