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Law360, London (May 7, 2020, 1:14 PM BST) -- Munich Re said Thursday it expects to face claims of up to €800 million ($860 million) this year from the coronavirus pandemic, mainly because major events are being canceled as a result of the lockdown ordered by the government.
The German reinsurance giant posted the estimate with its first-quarter results, which showed profits slipped 65% to €221 million, plunging from €633 million in the same three months to March last year.
Munich Re is one of the largest insurers of major sporting events globally. It is one of the main providers for the Tokyo Olympics, which has been postponed until next year, but has declined to specify how much it is required to pay out.
"The high losses due to COVID-19 are financially manageable for Munich Re," Christoph Jurecka, chief financial officer, said. "Thanks to our strong balance sheet and our prudent risk management, we remain a reliable partner to our clients — even in these challenging times."
The company was forced at the end of March to withdraw its previous profit target for the full year of €2.8 billion because of the losses linked to the pandemic. The company said Thursday that "in light of ongoing uncertainties" it would not set out a new target for the year.
Munich Re said it has also withdrawn a projected combined ratio of 97% for its property and casualty business, which includes event cancelation and business interruption lines. A combined ratio of under 100% indicates an underwriting profit, while a number over 100% indicates a loss.
The company's property and casualty combined ratio for the first quarter was 106%.
A report by investment bank UBS last month estimated that Munich Re, and its closest rival Swiss Re, both have 3.5% of market exposures to potential COVID-19 insurance losses, which could range from $30 billion to $60 billion depending on severity.
Swiss Re said last week it faced a $476 million hit in the first quarter of the year from claims linked to the coronavirus pandemic and a further investment loss of $300 million because of volatility in financial markets.
--Editing by Ed Harris.
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