Munich Re says the reinsurance sector has achieved a “sensible balance” in an environment characterised by high demand.

However, claims inflation in key segments remains a focus, despite lower headline inflation, and geopolitical and macroeconomic risks remain high, it has told the ongoing Rendez-Vous de Septembre in Monte Carlo.

In many reinsurance segments, claims inflation is high due to factors that are independent of macroeconomic conditions, the reinsurer says. Examples include: rising damages awards, particularly in the US; rising costs in connection to medical advances; and shortages of construction materials and professional staff.

“The market environment for reinsurers remains promising and challenging at the same time,” Munich Re said.

The reinsurer expects the market to grow by 2%-3% over the next three years, in line with the primary insurance sector. It says growth may be slightly stronger in Asia-Pacific and Latin America, and slightly weaker in Europe and North America.

Natural catastrophes and climate change call for specialist risk expertise, Munich Re says.

Its data points to an upward trend for insured losses that is closely linked to increasingly exposed assets. Global annual insured losses from natural catastrophes now often pass $US100 billion ($150 billion).

“Specialist risk expertise – bolstered by investments in new and revamped risk models, together with excellent global diversification – makes nat cat business profitable for Munich Re in the long term, while also allowing the company to further increase its risk transfer capacity in selected regions.”