AM Best has announced that they have affirmed the ratings of Munich Re and praised the “excellent risk-adjusted capitalisation, strong competitive market position, resilient operating performance and robust risk management framework,” of the company.
Munich Re saw its issuer credit rating remain at ‘aa-‘ with the outlook for all ratings, relating to the various operations of the company around the world, remain as stable.
With the reinsurance market still in-flux, AM Best praised the way Munich Re has positioned itself within the market.
“Despite persistently low interest rates and challenging conditions across global reinsurance markets, Munich Re has performed well during the past year,” the ratings agency said in a statement.
“A low incidence of natural catastrophe losses in the group’s property/casualty reinsurance division offset the negative impact of reducing and volatile interest rates and enabled it to generate an overall return on risk-adjusted capital comfortably in the double-digit range.”
The ratings agency did stress that dangers may lurk on the horizon for Munich Re, and the reinsurance industry in general, as disaster losses, market conditions and low interest rates could hit the industry hard.
“Significant challenges lie ahead for Munich Re over the medium term in the form of low interest rates and soft reinsurance market conditions,” the statement continued.
“Despite indications that reinsurance premium rate decline is slowing, there continues to be over-supply of capacity within the industry and no sign of hardening conditions.
“In addition, if natural catastrophe losses increase to a more normal level, there will be negative pressure on the company’s combined ratio. However, the excellent diversification within Munich Re’s (re)insurance portfolio, its solid distribution network and its conservative strategy place it in a strong position to withstand the aforementioned pressures.
“A.M. Best expects that Munich Re will maintain a resilient level of operating performance through the market cycle and emerge strongly as conditions improve.”