Munich Re says it’s cultivating new high-resolution risk models for regional events such as flash flooding, as the insurance sector faces the task of gearing risk management to the reality of climate change impacts.

“Given the losses incurred, it is necessary to develop a deeper understanding of these events now in order to be able to take better precautions,” Munich Re Board of Management Member Thomas Blunck said.

“In addition, a combination of greater prevention and a higher level of coverage through insurance is important, with risk-commensurate prices being the prerequisite.”

Munich Re predicts substantial business potential will arise from the insurance demand generated as businesses transition towards climate neutrality. The group’s Green Tech Solutions unit has developed a guarantee cover for hydrogen production plants, as green hydrogen is expected to play an important role.

Currently, extreme inflation, rising interest rates and asset slumps pose challenges for the entire insurance industry, alongside burdens from the war in Ukraine, the company says.

European reinsurers have been hit particularly hard because the challenges are topped by the sharp rise in the US dollar against the Euro.

Reinsurance capacity overall has declined, with short-term shortages emerging in some segments such as catastrophe covers in Florida, while rising demand is underpinning rate hardening

Munich Re says the global property-casualty reinsurance market will grow at least as strongly as the primary insurance market until 2024.

The group’s Economic Research Department estimates the reinsurance sector will grow by 2–3% worldwide from 2022 to 2024, adjusted for inflation, with the strongest growth likely to be in Latin America at 4–5%.