MUNICH (dpa-AFX) - In the insurance industry, the next price increases are in sight due to sharply rising costs. The world's largest reinsurer Munich Re wants to take inflation into account as a "significant factor" in the upcoming price negotiations with primary insurers, the company announced on Thursday. Natural catastrophes are a second price driver, according to the statement.

Unwelcome for the entire insurance industry is inflation in motor insurance. According to an estimate published in the summer by the German Insurance Association, companies' expenses for administration, sales, car repairs and other claims are expected to be about 2.5 billion euros higher than revenues this year. In addition to general inflation, insurers and reinsurers would also have to take into account "segment-specific inflation factors" such as higher prices for spare parts, Munich Re hinted at the expected price increases.

Hannover Re, the world's third-largest reinsurer, had already called for significant price increases in this segment in September. To get into the black on a sustainable basis in 2024, German motor insurers would have to raise premiums by about 20 percent, Hannover Re's German CEO Michael Pickel had said at the industry meeting in Monte Carlo. But this is unrealistic, he said. Starting next Sunday (October 22), reinsurers, primary insurers and brokers will meet in Baden-Baden to negotiate conditions for the coming year.

Primary insurers want to pass on costs

For their part, primary insurers such as Allianz or Generali take out insurance to be prepared for unexpectedly high losses. Munich Re and other reinsurers take on this business. So consumers do not directly feel price increases in the reinsurance business, but primary insurers naturally seek to pass on higher costs to customers.

By Munich Re's count, there have been at least seven natural catastrophes in Europe this year, each with insured losses of more than a billion euros. "On a global level, we see a clear trend of increasing losses from weather-related events over the past decade," said Clarisse Kopff, the board member responsible for Europe. "This applies not only to the number but also to the severity of individual natural catastrophes."

But there is an increase not only in major natural hazards such as hurricanes, but also in so-called secondary hazards - thunderstorms, floods and wildfires, the executive said. "The trend is still accelerating."

Strikes, riots, civil unrest

Potentially very expensive, according to the report, can also be the consequences of political and economic discontent. "In addition to geopolitical conflicts, we're seeing higher levels of social strife, meaning strikes, riots, and civil unrest," Kopff said.

In the past, he said, these events have tended to be localized with increasing frequency. "However, recent events have shown that they can also affect entire regions," the manager said, referring to the summer's riots in France. "In this development, we have to be particularly careful that no accumulation risks arise from this."

In the insurance industry, "accumulation risks" refers to losses that affect many customers at the same time and can therefore be very expensive: A hypothetical example would be a major cyberattack that brings large-scale businesses to a standstill.

Cyber insurance business is growing

With the wave of hacker attacks showing no sign of abating, Munich Re expects further rapid growth in its cyber insurance business. "We estimate the European cyber market to be worth $2.3 billion in 2022, and we expect the market to be worth around $8 billion by 2027," said Claudia Hasse, head of Germany.

"In our estimation, most risks are insurable," Hasse stressed. But the Munich-based group does not want to take on oversized - or unaffordable - risks: "Not insurable are the failure of critical infrastructure, for example a failure of the Internet, and cyber war."

War - including cyber war - is already excluded from any coverage today, he said. But Munich Re not only wants to exclude it more clearly in its own policies than before: "However, we want to address the specifics of cyber war even better through reformulated exclusions," Hasse said. "That is why we are supporting primary insurers in adapting their insurance conditions."/cho/stw/DP/stk