Quarterly Report 1/2009 - Munich Re Group

Interim management report Business experience
12 Munich Re Group Quarterly Report 1/2009
For the forthcoming renewals this year, we are proceeding on the assumption
that the market will continue to harden and price levels will rise. The financial
crisis has evolved into a severe recession, and the implications for the in -
surance and reinsurance industry are not yet fully foreseeable. Obviously,
however, the capital base and capacity of market players has declined significantly,
and capital-market-based instruments are either non-existent, at least
temporarily, or are very expensive to place. Since the risk-free interest rate has
also dropped to a very low level in recent months and the cost of capital has
risen, insurance and particularly reinsurance premiums really ought to rise on
a broad front.
At 97.3% (103.7%), our combined ratio after the first three months of the year
was in line with expectations. The total burden from major losses accounted
for 8.5% (17.8%) of the combined ratio. Expenditure for natural catastrophes
was lower than in the same quarter last year, as was the burden from manmade
losses. In the period under review, €187m (346m) was paid or reserved
for natural catastrophes and €98m (234m) for man-made loss events. The
largest individual losses were two natural catastrophes: Winter Storm Klaus,
which caused damage particularly in France and Spain and for which we
established provisions of around €80m, and the devastating bush fires in the
Australian state of Victoria, for which we made provision of around €65m.