Munich Re’s Martin Neuhaus on His Division’s North American Approach

At RISKWORLD 2024 in San Diego, Dan Reynolds, the editor-in-chief of Risk & Insurance, caught up with Martin Neuhaus, president of Facultative & Corporate at Munich Re North America, to discuss his division’s growth, risk management solutions and approach to the North American market.

What follows is a transcript of that conversation, edited for length and clarity.

Risk & Insurance: When were the North American operations of Munich Re Facultative founded, and how has it grown since then?

Martin Neuhaus: Munich Re Facultative was established in 2019 as a global business division. After conducting a study of our footprint in the U.S., we identified an opportunity for growth. While we would have invested in the U.S. anyhow, as a strategic decision, we were also fortunate with our timing, as the market conditions were very supportive.

Since then, we have invested heavily in staff and expanded our presence beyond our previous New York and Princeton-centric locations. We now have offices in New York, Chicago, San Francisco, Houston and Atlanta. Additionally, we began with about 90 U.S. employees and are now close to 160, which we’re proud of.

Despite being an underwriting company with a strong focus on the bottom line, we have achieved significant growth.

R&I: What solutions has Munich Re been providing in North America since its formation, in terms of sectors or specific risks?

MN: At Munich Re, we have a broad risk appetite across industries. We are active in all the major lines of business, including property, which we have always offered. In addition, we recently added casualty, something we didn’t provide out of the U.S. previously.

We also cover professional lines and have consistently offered engineering solutions. More recently, we have expanded into energy risks as well. While specialty lines like surety or marine fall outside our facultative and corporate offerings, we can always connect our clients and brokers with the appropriate resources if needed.

R&I: What areas do you think your current or potential clients need risk management solutions for?

MN: Weather-related risks on the property side are a significant concern for risk managers and various industries. Leading experts, such as Colorado State University, forecast a very active hurricane season of at least 23 named storms and five major hurricanes, which is well above average.

We have also witnessed a rise in severe convective storms, and losses from these events have been increasing over the past few years. In 2023, the U.S. experienced another record year, with $55 billion in insured losses.

This is an area where the industry needs to catch up, improve models and get it right. There are several challenges that we must address to effectively manage these risks for our clients.

R&I: How does Munich Re Specialty Insurance’s philosophy or approach to competing in the North American market differ from that of its parent company, Munich Re?

MN: As part of the Munich Re Group, we benefit from the brand name, financial backing and security that comes with being part of a well-established company. However, Munich Re Specialty Insurance operates like a startup within a large corporation.

We have minimal hierarchies and empower our underwriting teams to make decisions without lengthy referral or review processes. This allows us to be nimble and responsive to the needs of our clients and brokers.

What sets us apart is that we don’t buy reinsurance. We retain the risks we underwrite on a net basis, but we have significant net capacity that we can deploy locally without having to seek approval from our headquarters. This flexibility enables us to adapt to the needs of our clients and the market.

R&I: Has anything surprised you about doing business in the North American market over the past 5 years, in terms of perils or other aspects?

MN: I’ve been in the U.S. for 17 years, but I previously worked on the treaty side, so facultative and corporate business was new to me. What surprised me most was how positively our clients and brokers responded to our growth in this space.

We initially had a relatively small footprint and team in the U.S. I had always thought that the Munich Re brand was primarily known in the reinsurance space. While it was a known entity, I discovered that it also carries significant weight in the corporate space.

Especially as we launched during a time of market turmoil, it was really well received that we were expanding and willing to support our clients. That came as a positive surprise to me.

R&I: Would you be willing to share your outlook on Munich Re’s ability to compete and sustain its business, considering the recent success and shifting market dynamics?

MN: We believe we have built a strong portfolio that should be largely sustainable. However, it’s evident that the property market has become somewhat more competitive, which we anticipated.

Simultaneously, on the casualty side, there are emerging concerns in the market regarding social inflation. Recently, several carriers reported reserve increases, indicating a shifting dynamic in this segment.

Consequently, the market conditions will remain interesting as we navigate these evolving challenges. &