General parameters

Our business environment is one of increasing complexity, with an upward trend in natural catastrophes. We are also seeing a disproportionate rise in man-made losses in relation to economic activity. The causes for this include climate change, technological progress and advancing geopolitical interdependencies. In addition, concentrations of values are mushrooming and regions are becoming ever more dependent upon each other. New risk potentials and accumulation hazards are emerging as a consequence of these developments, meaning that risk models require continual refinement and the swift incorporation of new findings.

Fundamental changes are also resulting from demographic trends. In combination with falling birth rates, increasing life expectancy is placing enormous pressure on pay-as-you-go social security systems. By 2030, every two people in paid work in Europe will have to finance one person who is not. This means Europeans can only maintain their standard of living and high-quality healthcare in the medium term if they make additional private provision - a major opportunity for the private insurance industry.

Many countries are realigning their social security systems to these demographic requirements, and so for the time being insurers will have to cope with an uncertain legal and political climate. At the same time, insurers are having to adjust to the growing group of older people with special needs, particularly in highly developed countries. Flexibility and swift product development cycles are becoming increasingly important in competition.

In addition, the insurance industry’s regulatory environment is being affected by profound changes. The introduction of new rules for state supervision in Europe (Solvency II) and new accounting standards have implications for insurers’ capital requirements and income statements. Besides this, the current crisis on the international financial markets is producing great uncertainty, also with regard to state intervention. In this context, both the demand for insurance cover and its supply will change. A group like Munich Re, among the leaders in integrated risk management, can take advantage of the chan ging industry dynamics and exploit the business opportunities they present in reinsurance and primary insurance.