Partnership needed

14 June 2004 Angelo Coppola

Member of the main board of Munich Re. responsible for Europe, Asia and Africa, Karl Witmann, was in South Africa recently for the release of their local company’s results.

He says that while Q1 achievements are up, the challenge now is to make that sustainable.

“Our industry has a sad track record, it is cyclical and unprofessional, and dictated to purely by availability – when capacity is scarce then prices go up, and visa versa. We want to change the way this is done.”

He called on reinsurers to move and get away from unprofessional cyclical behaviour. They (Munich Re. will focus on bottom line – profitability. They want to teach themselves that they wish to provide risk adequate prices and terms and conditions.

Here is an example of what he means: Let us look at three areas where risk adequate prices could and should be applied in the life, motor car, or earthquake areas.

The exposure is different. For example it is more risky to cover a motocross rider than a couch potato, or to cover a car which is on the road often, compared to one in the garage. In terms of earthquakes – it is more risky in Tokyo, than Germany.

One thing that does remain constant though is that there are three partners in the process: policy holder, insurer, and reinsurer.

Reinsurers have the stats, actuaries, scientists, and specialists, plus lots of data and material. “We need to come to consensus in terms of the risk and exposures. We need to look at the price, and terms and conditions. If the exposure changes, then the price will change.”

The risk partnership applies to the phenomenon of global warming, There are three parties, with the governments entering into the equation.

“They need to play three roles and have three responsibilities.”

Internationally they need to reach consensus on tackling global warning and the development of renewable energy. There has been some movement in Rio, Kioto, and more recently Bonn.

“Secondly local government has to step into the equation.”

“Buildings should not be built in exposed areas, like riverbeds prone to flooding, and in earthquake zones builders and local governments must ensure that building codes are adhered to.

"Thirdly governments need to understand that there is no profit.”

Governments the world over tax reinsurers on balances left over at the end of financial years, not realizing that those funds are generally kept to take care of the catastrophe when it happens. And it will eventually happen.

There is no financial year end when it comes to catastrophes.

Quick Polls


The intention with lockdown was to delay or flatten the Covid-19 infection curve and give both the private and public healthcare sectors time to prepare for the inevitable onslaught. Did the strategy work?


No, the true numbers are not reflected. Almost a quarter of South Africans may already have been infected with Covid-19
It’s too soon to tell. We will likely get a second wave with stringent lockdown regulations in place again
Yes, South Africa bought enough time to make a significant difference. We saved lives and have passed our peak. The worst is over
fanews magazine
FAnews August 2020 Get the latest issue of FAnews

This month's headlines

Ethical behaviour - are you toeing the line?
Latest business interruption developments raise more questions than answers
Brokers remember: You are accountable...
A sustainable pension - How to manage living annuities in uncertain times
Claim stats… life can change in a heartbeat
Are South Africa’s income protection benefit providers ready for COVID-19?
Subscribe now