Munich Re Vows to Resist Underpricing Its Products.

American Re-Insurance Co., which walked away from $500 million in business this year, should be credited with starting to turn the soft reinsurance market, said the leaders of Munich Reinsurance Co., American Re's parent.

"We're very proud of them. It took a lot of coruage," said Clement B. Booth, a member of the board of management for Munich Re.

He and Hans-Wilmar von Stockhausen, another board member, said American Re's tough stance on pricing has led to the hardening of the market.

"In the U.S. is the most pronounced improvement, with 8% to 10% increases on reinsurance on top of 8% to 10% increases in primary insurance," Booth said. "It looks like Europe is turning the right way now, and renewals in April were promising for Japan."

"We've reached the bottom, and we're going in the right direction," von Stockhausen said. "We're picking up speed."

While Booth and von Stockhausen were pleased to hear their colleagues talk about price increases at the 44th annual Rendez-Vous de Septembre in Monte Carlo, they hope the turnaround won't be short-lived.

"We don't need the market to turn as much as stabilize," Booth said.

No matter what the rest of the industry does, Munich Re is committed to not pricing its products too low, Booth said.

With less capacity in the market, interest in alternative risk transfers, such as catastrophe bonds, may increase, Booth said. But he didn't view that as a threat to Munich Re.

"It's a new area that will be complementary to traditional reinsurance. We have done deals like that and will be involved in them again," he said. "I'm not scared of cannibalizing our business, because I'd rather we cannibalize our own business than let someone else do it."

On another topic, Booth and von Stockhausen said American Re's foiled plan to buy United National Group wouldn't stop the company from pursuing other acquisitions.

United National broke off acquisition plans with American Re Corp. because of the Pennsylvania Insurance Department's delay in approving the application, the company said. The delay stemmed from a dispute between the department and Munich Re over the German reinsurer's stance on participating in the International Commission on Holocaust-Era Insurance Claims.

"What the regulator did was wrong," Booth said. "The issue is quite clear."

Munich Re is a member of a German group that has offered to join the commission and establish a 10 billion-mark fund (about $4.45 billion) to pay delinquent Holocaust claims. Booth said Munich Re has offered to join the commission if the panel recognizes that as a reinsurance company, Munich Re wrote no direct business.