Favourable market conditions drive peak P&C profitability for European reinsurers: Fitch
Fitch Ratings has reported that property and casualty (P&C) reinsurance has reached peak profitability, with a record low average combined ratio of 81.5% for Europe’s big four reinsurers.
This “reflects healthy attritional performance and a low natural cat loss ratio for all reinsurers as market conditions remain favourable.”
Reinsurers benefitted from a combination of factors, including the continued earn-through of past rate increases, stable terms and conditions, and large losses that were within or below budget.
The discounting of claims under IFRS 17 reduced combined ratios by close to 9pp on average in the first half of 2025, a substantially greater benefit than in the first half of 2024.
While the sector as a whole thrived, individual company results varied. Munich Re maintained the best P&C combined ratio among its peers, despite a slight deterioration.
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Its ratio, which now excludes especially business, remains well below its annual target, supported by a large and diversified portfolio. The company’s decision not to add to its reserves in H1 2025 helped to produce a positive run-off result, Fitch noted.
Hannover Re’s ratio worsened to 88.4%, slightly missing its target. This was primarily due to increased prudence in reserving, which surpassed the benefit from a favourable underlying reserves run-off.
Large losses from man-made events that were slightly above budget also contributed to this outcome.
Hannover Re, SCOR and Swiss Re used strong underwriting results to build up reserves, in line with their stated strategies, which Fitch views positively for assessing reserves adequacy.
Munich Re did not add to its reserves prudency in H1 2025, which supported a positive run-off result.
Fitch concluded: “Net favourable prior-year developments were partially offset (Swiss Re) or fully offset (Hannover Re) by precautionary additions to reserves. Both Munich Re and Hannover Re have previously had substantial reserves buffers, having started to reserve at ‘best estimates’ plus a margin earlier than Swiss Re and SCOR.”
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