Munich RE AG (DAX: MUV) predicts that insurance rates will rise over the coming year because of substantial losses on one hand and reduced capacity of international reinsurance companies on the other. Years of low reinsurance, which kept insurance rates low worldwide, including in Israel, are over. Reinsurance rates for insurance companies will now rise painfully.
Munich RE chief executive Israel Hans Hornisch says, "In the wake of the subprime crisis, the most recent turbulences on the financial markets have led to significant reductions in the international stock markets, the sector worst hit being financial services. After several banks had been on the brink of bankruptcy (including Bear Sterns in the US, Northern Rock in the UK, and IKB in Germany) and were saved by takeovers or bailed out by the state, the problems in the financial services sector have now escalated over the past weeks. The financial crisis peaked again following the virtual nationalization of a major US insurer."
Hornish notes, "The re-evaluation of risks on a worldwide basis will be reflected in greater demand for capacity from financially strong insurers and reinsurers and in a markedly higher overall price level for reinsurance protection."
Hornish adds, "In Israel, developments over the past years in some classes of business, in particular but not limited to, commercial and industrial fire business, have lead to unacceptable levels of terms and conditions, already previously addressed by us. While we will not waver from our commitment to differentiated prices, decisive and drastic actions will be a precondition for our continued support in those classes of business."
Published by Globes [online], Israel business news - www.globes-online.com - on October 7, 2008
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