Munich Re reported a quarterly profit of €1.1 billion for the start of 2025 despite suffering the same amount in losses from the California wildfires. But the company also cited “market challenges” and growing pressure at the April renewals and while still expanding in premium terms, did reduce in certain areas like property XL.
Previously, Munich Re had pre-announced an expectation of paying around €1.2 billion in losses for the January wildfires in California.
In its Q1 2025 results, the reinsurance company disclosed around €800 million in losses for its property and casualty reinsurance division from the wildfires, plus a further €200 million for its global specialty insurance business, and a final estimate for all claims attributable to the Los Angeles fires to be around €1.1 billion.
Major losses were driven well above budget for the quarter for Munich Re, rising to 21.3% of net insurance revenue for the period.
Man-made major losses totalled €251 million, while natural catastrophe losses rose to €757 million for the reinsurer, after accounting for gains and losses from the run-off of major losses from previous years.
This was the main driver of lower profits for the company, but at €1.1 billion it was still a profitable start to the year for one of the largest reinsurance companies in the world.
Reinsurance contributed €853 million of the total, of which P&C reinsurance amounted to €343 million, life and health €501 million and global specialty just €8 million.
Christoph Jurecka, CFO, commented, “Although Munich Re did not emerge unscathed from the devastating wildfires in Los Angeles in January 2025, we nevertheless managed to generate a quarterly profit of €1.1bn. This exemplifies the Munich Re Group’s resilience, boosted once again by the prudent management of our business portfolio. For example, the impressive contributions to the net result from life reinsurance and from ERGO partially offset the higher combined ratios for property-casualty reinsurance and Global Specialty Insurance. We’re sticking with our profit guidance of €6bn for the 2025 financial year – thanks in no small part to ongoing favourable market conditions and the high quality of our portfolio.”
At the April reinsurance renewals Munich re continued to grow, with the company citing “considerable” expansion of premiums by 6.1% at the contract signings.
However, price decreases at the April renewals amounted to -2.1% and Munich Re said there were “market challenges.”
The company said, “Growing market challenges notwithstanding, the environment has remained favourable,” which is the first time in a few years that Munich Re has had anything negative to say about the way the reinsurance market has functioned at a renewal season.
The company said, “Munich Re was thus able to leverage both its close relationships with clients and its expertise to tap into attractive business opportunities arising from the expansion of existing client relationships as well as new business – particularly in India, Latin America and Europe.
“It was possible to maintain the portfolio’s high quality thanks to stable contractual terms and conditions. Munich Re consistently discontinued business.”
Prives fell overall, but Munich Re said it still felt compensated for the risks and higher loss estimates in some areas, of which inflation and other loss trends were the main drivers.
“Despite a 2.5% drop, the high price level of Munich Re’s portfolio changed little overall. When adjusted for portfolio diversification effects, rates dropped by 1.7%,” the reinsurer explained.
Looking ahead, the reinsurer said, “Despite market pressure increasing, Munich Re expects the environment to remain positive in the upcoming July renewal round.”
Munich Re has been more selective at the April renewal round, with volume declines in certain areas of property reinsurance, for example.
The company said that it reduced certain business that did not meet its risk-return requirements to focus on portfolio quality, such as in property excess-of-loss reinsurance. Instead opting to expand further in areas such as casualty proportional business in Europe, Asia and Latin America.
Hence, it sounds like Munich Re has found market segments such as property catastrophe risk a little less attractive to underwrite at the April renewal season, although no doubt maintained a large book still while being more selective.
In addition, Munich Re said it “defended” all-important terms and conditions, especially attachment points at the renewal season.
It is quite typical for the world’s largest reinsurance companies to begin to make some less-positive noises about the market at a time when softening has begun and competition has risen. If you looked back to the 2010’s you would have seen similar from the big four. It will be interesting to see whether the tone changes after the mid-year renewals, or whether this is setting the tone for market sentiment for the rest of the year and into 2026.
