30 September 2008
Dr. Nikolaus von Bomhard, CEO of Munich Re

"We will emerge stronger from the crisis"

Munich Re remains stable and very well capitalised – despite the market turmoil. With the insolvency of Lehman and the quasi-nationalisation of AIG, the financial crisis has recently assumed dramatic proportions. How serious are the consequences for Munich Re? Might the Group be endangered? Our answer is a clear "No".

The Munich Re Group will emerge from the crisis stronger in relative terms. That is because risk expertise, risk management and financial strength have increased in significance as a result of recent developments. And that is exactly where our core competence lies. The re-evaluation of risks will be reflected in greater demand for cover from financially strong insurers and reinsurers like us, and in a markedly higher overall price level for reinsurance protection.

As always, major losses or crises like the present one are also a test for our business model. And we are passing this test: The correct assessment and active management of risks on the investment and insurance side are proving their worth. With this strength, the Munich Re Group will decisively utilise the opportunities arising from the upheavals in the financial industry.

Naturally, as a leading player in primary insurance and reinsurance, we have not been left unscathed by the recent falls on the capital markets or major losses such as the recent hurricanes. But our financial strength remains intact; the substance of our Group is strong.

At the same time, we see very attractive short-term chances for our business. The erosion of many primary insurers’ capital and the resulting risk assessment and increased demand for secure reinsurance are virtually overnight putting Munich Re back in a hard market with rising prices. Many opportunities are also presenting themselves in the primary insurance sector.

Much of the current crisis has to do with lack of risk management and inadequate evaluation and consideration of risks in operative business, along with strategic decisions geared too strongly to short-term results. The lesson for the financial services industry is that when evaluating returns, the risks entered into have to be scrupulously and honestly assessed and made transparent. The expertise and management philosophy necessary for this are core competencies of the Munich Re Group. That is why we have the right set-up in the current crisis; and we will be in a stronger position relative to other market players at the end of it.