Ladies and gentlemen, welcome to our media breakfast on the occasion of the Baden-Baden Reinsurance Meeting today. My name is Irmgard Joas. I'm spokesperson in the Media Relations team of Munich Re. As your host for today, I am very pleased to be joined on stage by Clarisse Kopff. Clarisse is Member of the Board of Management at Munich Re and is responsible for our European markets. With us is also Claudia Hasse. Claudia is our Chief Executive, Germany, and she's also responsible for our cyber business in Europe. They will, in a minute, start with a presentation on the topics that move our industry these days. Before I hand over, please allow me to make a few organizational remarks. For the smooth running of the briefing, we won't be taking questions during the presentations, but of course, we will open the floor for a Q&A session right after the presentation. If you want to raise a question, then, during the Q&A session, we kindly ask you to raise your virtual hand by clicking on the corresponding symbol on top of your screen, and to ask your question directly after I call you. But first, we will now move on to the presentations, and with that, I hand over to you, Clarisse. Thank you, Irmi. Good morning, and welcome to everybody. This is my first Baden-Baden, and my first press conference ahead of Baden-Baden. I joined the Munich Re Group first of December last year. I'm the board member in charge of Europe and Latin America for non-life reinsurance and also for credit worldwide. Claudia is with me, in charge of Germany, as said Irmi, and also in charge of the cyber book for Europe. Our purpose today is to give you a little bit of color on the market, on the demand dynamics, on the supply dynamics, and what our underwriting response is to that. What we would like to do is maybe 10 to 15-minute presentation, each of us two, and then we will give the floor to the Q&A. Turning to the environment, so what do we see? Well, we see a world of uncertainty and complexity with many factors coming in. Can we please have the slides? And this is not necessarily bad for us, because we are in the business of risk-taking, of risk managing, and it's certainly not necessarily bad for players who have a strong balance sheet and good underwriting capacities. So what are these factors influencing the market? It is first, the sticky inflation. Then we still have, and we continue to see, high Nat Cat activity. We have increasing geopolitical and civil unrest. We have rising cyber threats, and all this in a context of rather muted economic activity. So I will touch upon a few of them. I will leave cyber to the second part of the presentation, because Claudia is going to address that. L et me start with the GDP outlook. You will see on this slide that we are in a rather sluggish environment. As a matter of fact, Europe is predicted to almost stagnate in 2023, with a very low GDP growth rate at 0.5%. Some of the flagship countries in there are already in recession, like Germany, and the pickup for 2024 is going to be very moderate, as you can see from this slide. The biggest topic, one of the biggest topics, in the industry remains inflation. As you can see, on this slide, you have actually pictured here what the initial forecasts of inflation were and what they have turned out to be in the meantime. And you can see that there has been, quite consistently, at least for 2021 and even more markedly for 2022, an underestimation of the inflation level globally in the industry. The difference between the forecast and the actual seems to narrow now, 2023, just as the inflation itself is abating somewhat. It is still forecasted to be 5%, around 5% in the Eurozone this year, and it is expected to be around 3% next year, which is still above the central bank target of 2%. How did it hurt us or touch us? It is fair to say that here at Munich Re, we were always very conservative on these inflation assumptions, and we were also conservative in choosing our loss picks in the reserving. But still, I mean, inflation is there, and it's affected us in more or less, well, it affected the industry globally, starting with the primary insurance, actually, in almost all lines of business. Here in Europe, there is a pretty sizable motor book. Typically, the motor book was affected both on short-tail business and on longer-tail business. If I take an example, repair costs have increased the claim cost on the damage side. But just as well, and even more, the casualty and long tail part of the business has been hit because bodily injury is influenced by future wage increases and future healthcare costs. And it's also fair to say that the end of the estimation was not only for the current estimated year, but also for subsequent years. So altogether, as I said, casualty lines are more hit than short-term lines. All lines of business, property has been hit as well, in terms of construction costs. In the U.S., we have seen high social inflation. It is also fair to say that we have seen less of this in Europe, for a good reason. We don't exclude that this might spill over at some point in Europe, but it's also fair to say that the plaintiffs' bars in the U.S. are extremely organized, well-financed as well, and this is not something that we yet see in Europe. Nevertheless, inflation across the board has been there. What did we do about it? Well, we reduced our exposure in the U.S. earlier, actually, when we compare ourselves with the rest of the market. We were, in Europe, pretty conservative in writing new business altogether, so we have rather small exposure or moderate exposure in Europe. We have, of course, adapted our models each time, making sure that we pick the right inflation KPIs. It's not only general inflation, as I said, it's also repair costs, it's also wages, it's construction prices, you call it. So we had to be very proactive in adapting our models. We have adapted our pricings, we have adapted our wordings in reinsurance, and I said it, we have been cautious in underwriting in reserving from the very beginning. We continue with that discipline. Also, this is probably the most important: we have been exchanging massively with our clients to make sure that we run on the same assumptions and that both of us take informed decisions on inflation, and this dialogue has been extremely important. Now, let me switch to the Nat Cat trends and what we see. So these are the insured market losses in Europe. You can see here pictured that it has been an increasing trend. You have here the total losses, so it's an amount, but it's also fair to say that it has been an increase in frequency, and it has been also an increase in severity. The green line is picturing all Nat Cats, and the gray line is picturing the non-peak perils. So what do we call non-peak perils? It's typically storms, it's typically floods and wildfires, as opposed to the bigger hurricanes, typhoons, cyclones. Europe is, of course, less hit by these, and it's also pretty natural that the share of secondary perils in Europe is rather big. You can see that the two lines have been on an increasing trend. If you look at 2023, this first slide is showing the evolution until 2022. If you look at 2023 on the next page, you will see that it has not abated, and this is picturing what happened actually up to now, in terms of Nat Cat activity, with individual losses above EUR 1 billion of insured losses, each in the EMEA region. Of course, you will recognize here the earthquake in Turkey, which has been the biggest hit so far, with the market losses estimated at around EUR 5 billion. All the rest was weather-related. So if we take a few example, Germany has been hit by severe storm and hail, Italy, hail and flood. We had storms in the Nordics. We had storms, we had flash floods in Slovenia, Austria, Croatia. So it hit about all over the place. Maybe not so much south of Europe beyond Italy, but it's fair to say that it hit about everywhere, and it also demonstrates that the activity is actually increasing. So here again, what did we do about it? We adjusted our reinsurance structures, prices, and wordings. And this is always an individual discussion, because each client deserves to be treated in a differentiated fashion. But nevertheless, we have adjusted our reinsurance conditions broadly. We are expanding our models towards non-peak perils, because we see that these account for a lot of what we see out there. We care for having a proper diversification across the book. Here, you see only Europe, but it's also fair to say that we have an active portfolio management in terms of our exposure to the various regions of the world, because diversification plays a role. We measure that we have enough surface, actually, to absorb one of these losses, one of these big events, would they happened. And of course, we have our scale and diversification so that we can be a substantial and remain a substantial, a sustainable, and a predictable player. And that's very important to our clients. So we have an appetite, provided that we get the proper prices, for this. And why do we have an appetite? You can see on the next slide that we've actually been pretty good at predicting what would happen in terms of Nat Cat activity losses. This left-hand side chart shows you the deviation of actual combined ratios compared to what we had estimated in our models, and we've been pretty accurate. If you see the range of error, it's pretty narrow, even though the last five years have been particularly high in terms of Nat Cat activity. So we trust our models, and hence we trust our pricing, and hence we have confidence to put more capacity out, again, provided we get the proper pricing. We think the upward trend is manageable because of our good underwriting capability. Also, which is an important matter, we don't need retro capacity to be active in this market. So not only we have the surplus to actually and the strength to actually provide that capacity, but we are not dependent on any other third party. We don't need to wait for them, so we can quote early. So, our clients can rely on predictable and early quotes out there. And as a matter of fact, we have provided more coverage over time, and our Nat Cat gross written premiums have increased nicely over the years, as you can see on the chart. Now, I would like to turn to another topic, which is political and civil unrest. We now have two large conflicts in our region. We have Russia and Ukraine, so the war has been going on now for 1.5 years, and we have a new situation in the Middle East. This is extremely sad, and this has devastating consequences. Here, I would like to focus more on civil unrest and the trend we are seeing here. So we call it, in our jargon, SRCC. It stands for strikes, riots, and civil commotion. What are the causes behind that trend that you see on the chart? Well, you have first inflation, plus the tax burden, which in many European markets is creating an erosion in the purchasing power of the people, and this created, typically, what you saw in France, the Gilets Jaunes movement. Also in France, we had recently pretty substantial riots after a young man was shot dead by police, and the policeman was accused of racism, and this had impacts on generating civil unrest in the country. But we have that not only in Europe. We've seen the Black Lives Matter movement in the U.S., we've seen movements in Chile, and we've seen movements in South Africa. So this is a trend that we don't only see in Europe, but a little bit all over the place. And then we might also have a spillover effect from the conflicts that we are seeing in the Middle East, and we have to observe that very closely. Again, what do we do about it? Well, it's really about stringent limit management. We usually have sub-limits for these types of covers, so we need to manage them very closely. It's a question of wording also. We need to be very clear whether these types of risks are included or excluded from the coverage, and we also need to watch the accumulation risk. These risks have been, so far, very local, easily digestible, but we could see scenarios where actually, if you take, I don't know, climate protesters, if there were a consultation that everybody is out there in the street at the same time, in many place for the same reason, you could see an accumulation risk. So we need to be careful about that. So we've seen a high frequency, a high severity in Nat Cat s and manmade events, plus an inflation, and this is triggering a pretty substantial increase in demand. If we consider just the additional demand in Nat Cat, in Europe, it is considered to be around EUR 5 billion, out of which EUR 2 billion is probably for Germany. A little bit early to say, but roughly, roughly in that ballpark. What do we have as a supply in front of that? And what does the supply dynamics look like? Well, we don't expect big capital inflows, nor in the traditional reinsurance market. As you've seen, we've had a slight pickup in reinsurance capital in 2023 from the low point in 2022, but it's also fair to say that there is no big capital inflow. Why? Because the reinsurance market overall still needs to demonstrate that it is capable of earning a good margin and a sustainably good margin. And then we also have no big inflow from nontraditional capacity, which we call Alternative Risk Transfer. This has been rather stable over time, to a level of roughly EUR 100 billion, with cat bonds developing faster than collateralized reinsurance, but this is also not providing a big capital inflow. So there is still an imbalance between high demand, increasing demand, and relatively stable supply dynamics. So in this renewal. The intention is, as it has always been, to be a consistent and predictable player, provider of capacity, as we have always been, despite the challenges that I outlined. Why? Well, number one, because we believe we have the proper underwriting capabilities and an underwriting excellence that actually adapt to circumstances. We are constantly working on adapting our models to the last data points. We reevaluate our projections on a very regular basis. We are rather conservative when it comes to inflation, as I said. We are in permanent discussions with our clients on structures, meaning commissions, attachment points. We are in permanent discussions with them to understand what they do on the primary side and adapt accordingly, or reinsurance, condition. So, that is the core, the core of what we do. And to paraphrase, Stefan Golling in Monte Carlo, underwriting matters and has always mattered. And that is also why we never had a big, unexpected accident, so far. And then we dare to actually pose our conditions on emerging risks, which, we think are of a systemic nature. Cyber is an example. We are now talking about the exclusion of cyber war. This is quite logical, because contrary to cyber, which is to traditional war, which is normally in recent decades, at least, constrained to specific regions. Typically, a cyber war could quickly become global, and if that were to happen, that would create a systemic risk that would be unbearable for the industry, and such an accident would actually scare away a number of players in the market and would pose a problem of the mere sustainability of this line of business. So we dare to be a leader, a thought leader on some of these topics, because we have at heart to bring in a sustainable capacity and to offer sustainable products in emerging lines of business. Number two, so I said, why will we be there with ample capacity, good quality capacity, predictable capacity? Number one, I said, underwriting. Underwriting excellence is at the core of what we do. Number two, equally important, is scale. We have scale. We have a strong balance sheet. We are highly diversified. We have the financial strength. Our solvency margin is high. In this industry, big is beautiful. That's the way it is. It's all about the potential of absorption of any big loss or a series of individual losses, again, with no dependence on retro. That's why we are comfortable writing more business at the right price. We are consistent. There is no such thing as stop and go. And we are recognized and valued by our clients, who told us that last year in a renewal season that was pretty tense. That doesn't mean we rest on our laurels. We invest in the future. I've talked about models. It's not only about our own internal model capabilities. We try to reach out to external providers to enrich these models and mutually help in creating the large generation models. Technology is what we aim to use as well. This is not only an efficiency play, but it's also, again, an underwriting play, because technology will allow us to have a better grasp on our exposure, systematically screening through the subtleties of the wording and making sense of these. Technology will also allow us to absorb unstructured data with the same purpose of having the best-in-class underwriting. We heavily rely on people, because reinsurance is an expert business, and our experts come with a wealth of experience, but they have also at heart to catch up on any new development and to get trained, also on new technology, so that they are constantly up to date. I would like to finish there and leave the floor to Claudia, who will zoom on the cyber situation and also on the German market, and what we further expect from the Baden-Baden meetings upcoming. T hank you very much, Clarisse, for this transition already to the next topic, which is cyber in Europe. But first of all, a very good morning from my side, and also a warm welcome to all of you. So if we move to the next slide, please. As you can see here, the European cyber market is growing. For 2022, we estimated it at around $2.3 billion in premium, which is almost 20% of the worldwide premium, and we expect it to reach the $8 billion mark in 2027, which translates into a very strong CAGR of around 31%. Munich Re has a strong market position in Europe. We are active in all segments, including large industrial businesses, but our focus is on SME business and on personal lines business. What is key for us is that we help make sure that the cyber market is a sustainable market, as Clarisse already mentioned. And for that reason, we support market efforts, for example, regarding accumulation modeling. In other words, we don't keep our methodological expertise to ourselves, but share it with the market in order to help it mature and avoid underestimating the accumulation exposure. When we talk about accumulation risk, and Clarisse already touched on that as well, cyber war poses a significant systemic risk. And to be very clear here, war, and also cyber war, is excluded in our current wording. However, we want to make this exclusion more reflective of particular cyber warfare circumstances. And for that reason, we support our clients in developing respective war exclusions, and we accompany them on their way to implementing these clauses. We strive for improved data quality and quantity because only with appropriate data, we are able to analyze loss patterns and can underwrite our cyber business properly. And with that in mind, we have grown the Munich Re cyber book in Europe over the past years, and we plan to continue on that path, because this book is a profitable book, and this is even true if we factor in the possibility of a large accumulation loss, a loss we have so far not seen in reality. We see two reasons for this success. First of all, we choose our client partners wisely. And second, we support our clients with all our know-how in pricing, wording, and risk assessment. However, despite the profitability of our European cyber book, we remain in a high-risk environment regarding cyber, and on average, our technical prices will increase in this renewal, although this, of course, ultimately is a client-by-client assessment. So in sum, cyber is a prime example of how underwriting excellence makes all the difference. It enables both our clients and ourselves to profitably underwrite a complex line of business. And this strength has brought us the title of Cyber Reinsurer of the Year for seven years in a row now. Let me now move on to talk about our home market, Germany, with a goal to make it a bit more tangible, how we act in one of our key markets, and how we support our clients with their challenges. In Germany, we started implementing a new strategy in 2020. It revolves around two key pillars. First, fostering mutual trust, and second, leveraging our expertise to support our clients in overcoming their challenges. Let me first elaborate on the concept of trust. Mutual trust is essential in the reinsurance business because decisions in our industry typically involve long-term commitments, and they are very significant for both sides. Clients want to work with partners they can rely on. Here are two examples of how we make sure that we are a reliable partner. First example, we were very clear at the beginning of the last renewal that we had Nat Cat capacity available and were willing to deploy it at appropriate prices. So even in this last turmoil renewal, German clients knew that Munich Re was the rock in the storm, providing them with additional Nat Cat capacity. Second example, many clients told us that we were the first reinsurer who provided them with a quote, with an offer, and they highly appreciated that because we gave them planning certainty. And thanks to this behavior, the last renewal became a great success. The second pillar of our strategy is to leverage our technical and digital expertise to support our clients in overcoming their challenges. And here's an example regarding technical expertise. Many clients make their portfolio very transparent to us, asking for analysis on trends and sometimes on loss drivers. And they do that not because we were demanding it, but because they value those in-depth technical discussions. And we, in turn, feel comfortable in providing capacity because we know what the client is doing and have trust in their decisions. On this slide, we see two examples of our digital expertise. In both cases, Munich Re combines domain expertise with data analytics know-how to enhance our solutions. The first example is called ImRisk, and this is a tool that addresses an urgent problem of the German market, which is the detection of buildings that are prone to water leakages. We do this by combining internal and external data with machine learning methodologies. With that, the insurer can take targeted action and reduce their loss ratios. The second example is called Realytix Zero. This is a platform that significantly advances the digitization and automation of the underwriting process for our clients. They can use the platform to digitally configure new and existing insurance products themselves, so they can be implemented and sold within just a few weeks. The system is cloud-based, requires low or minimal programming scale, skills, and can be easily integrated with other systems through powerful APIs. The next evolution will be the use of generative AI, which will enable clients to enter prompts in natural language. So basically, you simply tell the AI what to do, and this will further increase accessibility, usability, and speed. So far for the strategy in Germany, and it has brought us remarkable success. So we increased our market share in P&C business in Germany from 11% in 2020 to 15% in 2023. We expect our profitable growth path to continue in Germany further. The reason is that also going forward, we are in a perfect position to help our clients with their current challenges. These are regarding Nat Cat. We already heard from Clarisse that both the frequency and severity of natural catastrophes are on the rise, and this is also true for Germany. On top of that, inflation also leads to an increasing demand, and Clarisse already mentioned the number of EUR 2 billion, which we expect in additional capacity for Germany. This has to do with many requests we already got from clients, and this is how we came to that number, which I think is a very high number overall, also compared to what we have seen in the previous years. Munich Re is prepared to allocate additional capacities under the precondition of technical adequate prices. Inflation, as Clarisse pointed out, will remain high, also in Germany, and insurers need to suitably reflect both general and specific price increases in their estimates. In that, we support our clients on a line- of- business basis. Where estimates are particularly difficult, also in Germany, is in the area of motor insurance, which is currently characterized by very high combined ratios. And here we support our clients with all our consulting services. And in our own reinsurance pricing, we additionally include the specific circumstances of the client. In other words, dealing with inflation is a science in itself, and our technical approach will be crucial for both our clients and ourselves. Commercial industrial fire business is also aligned with combined ratios, clearly above 100% over the past years. In order to reverse that trend, all market players will have to do their part. And we work very closely with our clients to fully understand the root causes of those negative results and to develop appropriate solutions for their portfolios. Volatility is on the rise for insurers, who have to carry more risk in their own books. We develop tailored solutions together with the clients to manage volatility and capital requirements. So in sum, we provide our clients with a powerful offering, which will enable them to increase their profitability and to grow at the same time. Now, let's make it even more concrete what our clients can expect from us during this renewal. At the right technical price, we will deploy additional Nat Cat capacity. We do not make a general statement where prices will be going, because we think that every client deserves an individual treatment. We will be able to explain our prices always technically. We will continue raising wording questions where necessary, and we will assess whether upside and downside potential between our clients and us are appropriately distributed. And this is particularly relevant for commission levels and attachment points. We will send out our quotes timely to give our clients planning certainty. And to finish, just one personal remark. I have been in this business and with Munich Re for 20 years now, and I enjoy particularly this phase, because it's very rewarding to see how our clients benefit from a financially strong Munich Re that allows us to provide the capacity as well as the expertise that our clients need in order to be successful. I am very much looking forward to the dialogue with our clients in Baden-Baden, because I know that we can live up to our promises.