Joachim Wenning, Chair of the Board of Management at Munich Re, has allayed shareholders’ fear that the reinsurer’s exposure to the conflict between Russia and Ukraine is “negligible.”
Speaking at Munich Re’s annual general meeting (AGM), the chairman said that the company will be able to “easily absorb” any direct effects of the war on its business.
Russia invaded Ukraine on February 24 and the impact of the sanctions from the western countries against the aggression is being felt across the world, driving up prices of commodities and energy.
The European Union will Wednesday vote on a new set of sanctions that are expected to hit the Russian energy and banking sectors. The impact of the current sanctions is hugely felt in sub-Saharan Africa like Nigeria where prices of food items have soared on the scarcity of commodities like grains for both Russia and Ukraine are the major suppliers.
Wenning however told the shareholders that its insurance business in impacted countries was very limited when he addressed concerns about the company’s exposure to the ongoing conflict in Ukraine and the resulting sanctions imposed on Russia.
Moreover, in classic property insurance – the line with the greatest potential exposure – war is a standard exclusion for Munich Re, both in the regions currently affected and worldwide.
However, Wenning did acknowledge that the company does offer “limited cover for the direct and indirect impacts of war in certain special lines,” including in particular aerospace, transport and credit, as well as political risks.
“In many cases, it cannot yet be determined to what extent cover applies,” he told shareholders.
Additionally, the Chair warned that he could not guarantee that Munich Re would not suffer negative consequences to its investments going forward, despite its “relatively low” investment exposure to Ukraine, Belarus and Russia.
“At the moment, the effect on Munich Re’s earnings resulting from changes in the value of our investments is manageable,” he said but cautioned that political and economic upheavals across Europe and elsewhere could worsen as the war and its sanctions drag on.
“Moscow’s war of aggression in Ukraine represents a threat to peace in Europe,” Wenning told shareholders.
“Against this backdrop, only a strong Europe – as a guarantor of freedom, democracy and prosperity – can endure. Accordingly, making Europe more competitive must become a central political priority. Europe’s interests can be better represented from a position of strength,” he asserted.
“Although insurance cannot resolve geopolitical conflicts, our industry certainly can do its part to protect both the safety and livelihood of people and the resilience of companies on a day-to-day basis. When we cover risks, we also foster development, innovation, and progress in our society.”
During the AGM, Munich Re’s proposed dividend of €11 per share and the extension of its share buy-back option were both approved, and Ernst & Young was appointed as auditors.
Wenning also confirmed a projection of €3.3 billion for Munich Re’s annual result for the current financial year, building on last year’s result of €2.9 billion.