Munich Re

130 years ago, inspired by the markets of London and Switzerland, German entrepreneurs have founded a company that was independent from insurers with a portfolio of diversified risks. In its early years, Munich Re was just a small shop with a couple of rooms, four employees without telephone. Today Munich Re has become a world leader in its field.

Photo credit: Munich ReTo get there, the company has suffered setbacks throughout two world wars, major disasters and financial crises. Munich Re would always emerge with renewed strength reflecting the image of a sound and innovative company.

The beginnings

Photo credit: Munich ReCarl von Thieme

In April 1880, Carl Thieme set up Munich Reinsurance Company. The contractor, in association with Cramer-Klett, Schauss, Pensel and Schmidt-Polex, registered the company in the trade register of Munich city on April 19, 1880.

The first reinsurance treaty is concluded with the German insurer Thuringia, based in the central part of the country. The first foreign customer is Almedige Brand Assurance Compagni, a Danish company. Only 32 treaties were underwritten after a year of practice, yielding a premium equal to 500 000 EUR.

As of 1885, social innovations had been introduced: the employees, therefore, had a Christmas bonus and a corporate pension fund in 1891. A little later, fixed schedules were set up from 9:00 a.m. to 4:00 p.m. with free lunch. In 1898, a housing assistance was offered to employees who wished to buy a home.

The first representation office was opened in Paris in 1886. It also covers Belgium and Spain later on. It will be followed by those of Saint Petersburg where marine insurance was growing at great speed, then Copenhagen and Stockholm.

In 1888, Munich Re invested for the first time in a company. It held shares in the Russian insurer Pomoshch. In the spring of that year, the company was introduced in the stock market at the price of 700 marks. The title was worth 990 marks in January 1890 then 2435 ten years later.

In 1889, Carl Thieme and Wilhelm Von Finck set up Allianz Versicherungs Aktiengeselshaft, a company specializing in third party liability and personal accident insurance. Allianz would become, in 1914, the largest German insurance company generating revenues of 25 million EUR.

During its second decade of existence, Munich Re would be deployed abroad. First in London in 1890 and then the United States in 1892 where the company would establish a subsidiary seven years later. Other acquisitions in Austria, the Netherlands and Switzerland were achieved.

In its early years, Munich Re was just a small shop with a couple of rooms, four employees and no telephone.

New insurance products were launched in the early twentieth century

In 1898, the reinsurer would develop a new product: engineering insurance. A license was obtained for Bavaria early 1900, then for all of Germany in 1903. In 1900, the company marketed the first contract covering natural catastrophes. But in 1906, the earthquake in San Francisco which reached 7.8 on the Richter scale caused the death of 3000 people and devastated 80% of the city. It would cost Munich Re 5.6 million EUR, that is, the largest disaster ever known by the company over a long period of time.

In 1907, at the request of a Hungarian merchant, Munich Re invented luggage insurance. A company that specializes in travel insurance would be established in Budapest in which Munich Re holds stakes. The same year, an insurer from Stuttgart developed the motor third party liability. The Bavarian reinsurer realized the full scope and joined the insurer Urania.

Photo credit: Munich Re

As of 1910, Munich Re embarked on aviation insurance. In 1913, a first plane under construction was covered but the concept really took shape starting from 1919.

In 1912, the first Japanese contract was signed. At that time, the company had over 300 staff members in Munich and in 1913 moved to a new headquarter, the Königstrasse, where it is still located today.

Munich Re during the years of war

The declaration of war in 1914 profoundly affected the evolution of Munich Re's business. The German law prohibits all trade with enemy countries. Investments in foreign companies were affected by this legislation. A number of treaties were cancelled. But the good relations of the company abroad enabled it to maintain operations at a level that stabilized during the conflict.

In 1917, Munich Re and Globus Versicherung AG established Hermes, a company that specializes in credit and which is the current leader of this market.

At the end of the war, the Treaty of Versailles excluded German companies from markets such as those of Russia, France, Great Britain and the United States for many years. Munich Re lost more foreign customers as well as the control over its American portfolio.

In 1937, the group was still suffering from the aftermath of the war. Moreover, the exchange control and the political developments had negative effects on international trade. The company has nevertheless succeeded in recovering its pre-conflict levels of activity despite the inability to operate in Russia and the United States.

At the end of World War II the situation was even more difficult. Munich Re had not only lost its assets in enemy countries and in Eastern Germany but also in the majority of the neutral countries.

In 1946, the reinsurer had to face the American military court for falsifying information on its assets abroad. A fine of 4 million Reichsmark was imposed. Several members of the Board were sentenced to prison. As of 1947, the German reinsurers were banned from operating abroad.

In 1948, the currency reform required recourse to the Deutschmark. The capitalization of the company in the new currency amounted to the current 15 million EUR. But the inability to develop a geographically-balanced portfolio weakened the group and the impact of the large claims in 1948 and 1949 worsened the financial situation of the company.

Time of growth

Photo credit: Munich Re

Starting from 1950, international trade was again allowed for German companies. Munich Re opened coordination offices in Asia, Africa and Australia focusing on engineering insurance. Its business was growing rapidly. In 1951, an organization per country and class of business became necessary. In 1953, the level of activity reached two thirds of the pre-war levels.

In 1959, the company launched Munich American Reinsurance Company, a life subsidiary in Atlanta (USA), then in 1960 opened offices in Montreal (Canada).

In 1962, the Hamburg storm affected the company up to 19 million DM, 13.5 million of which for its own account. Until 1968, Munich Re would be deployed mainly in Asia (Hong Kong and Tokyo) and Africa with Munich Re South Africa.

In 1969, Horst K. Jannott became the sixth president of the group. He is considered as the architect of Munich Re's new look.

1970-1990: the increase of natural catastrophes

The 1970s were marked by the group's continued effort to develop Asia: Sydney, Manila, Singapore then Taiwan in 1981. In 1989, the Bavarian reinsurer had 65 offices outside Germany.

In 1973, Anton Stankowski, a popular designer, created the new logo: the cubic structure and the horizontal lines stand for, among other, exchanges, partnership, trust, solidarity and differentiation.

Photo credit: USGS / MarcusitoBy increasing its presence all over the world, the company was also faced with major disasters: the storm of January 3, 1976 (175 million DM), the Munich hailstorm of 1984 (166 million DM), the earthquake of Mexico City 1985, which became the largest loss since the creation of the company, then Hurricane Hugo in 1989 (250 million DM).

These increasing claims had led Munich Re to mobilize additional resources in the mid-1970, creating services and tools to analyze and underwrite the risks of natural catastrophes, Geo Risk Research, NatCatService, Nathan, etc.

Return to growth despite heavy losses

Photo credit: Munich Re"Am Münchner Tor" building

The 1990s were marked by a rapid expansion of the group: the turnover increased from 13 billion EUR in 1990 to 21 billion EUR in 1999.

In 1990, Munich Re started a cooperation scheme with the companies of MedNet network before purchasing it in 1997.

In 1992, Munich Re Italia was launched; it became Italy's number one reinsurer in 1999 and the 70th representation of Munich Re in 32 countries. Kuala Lumpur came next in 1994.

The success prompted the group to get Munich Re titles continuously listed in the Frankfurt Stock Exchange in March 1994. The same year the London office had, for the first time, introduced directors and officers third party liability insurance.

In 1996, the group made a decisive move in the United States by acquiring American Re for 3.3 billion USD, then took control of the insurer DKV in Germany, allowing it to strengthen its position in the “personal accident” insurance sector. Finally in 1997, Ergo, a major player in the sector across the Rhine, was founded. Ergo is made of two pillars: the Victoria and Hamburg Mannheimer DKV insurers, both properties of Munich Re. As of 2010, the policies have been marketed under the name of Ergo as both companies have been absorbed. Ergo would go international as of 2000.

Photo credit: USGSThe year 1999 will go down in the company's annals: two major storms affecting France, Sydney was ravaged by a shower of hail , Japan was hit by Typhoon Bart, earthquakes shook Turkey, Greece and Taiwan. In total, the cost for Munich Re amounted to 1.1 billion EUR (1.1 billion USD).

Two years later in 2001, it is the disaster of September in New York that struck the group. The burden on the Bavarian group amounted to 2.6 billion USD. Floods in Central Europe in 2002 and especially Hurricane Katrina in 2005 (1.6 billion USD) also strained the results.

But these claims have in no way affected the group's expansion strategy: obtaining a license in China in 2003, then in India in 2004, Malaysia in 2006 for takaful reinsurance, in Russia the same year and finally in Brazil in 2008.

Recently the Bavarian reinsurer has engaged in new challenges such as climate change by signing the United Nations "Climate Group" or the development of clean energy with the DII project in North Africa.

Munich Re Group counts now 47 000 staff members around the world making a profit of 2.56 billion EUR (3.66 billion USD) for a 2009 turnover of 41 billion EUR (58 billion USD), 25 billion EUR (35.8 billion USD) of which come from reinsurance which involves 13 300 employees. The Group's market capitalization is of 21.5 billion EUR (30.8 billion USD). Its financial rating is “AA-” from S&P and “A” from AM Best, both ratings with stable outlook.

 
Munich Re Group counts now 47 000 staff members around the world, making a profit of 3.66 billion USD for a 2009 turnover of 58 billion USD, 35.8 billion USD of which come from reinsurance.
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