insurance company Munich Re experiences a steep decline - insurance rates significantly drop
Munich Re Maintains High Rates Amidst Soft Reinsurance Market
Munich Re, the world's largest reinsurer, has bucked the trend in the current "hard" reinsurance market by maintaining rates for coverage against natural catastrophe losses at a high level. This decision is primarily driven by the exceptionally high insured losses from natural disasters in 2025, which reached $80 billion in the first half alone—the second-highest since records began in 1980.
The ongoing high rates are a response to the unprecedented catastrophe losses totaling $131 billion globally, with $80 billion insured—95% above the 10-year average. These losses, such as the costly California wildfires (about $40 billion insured), raise risk perceptions and the cost of capital for reinsurers.
Climate change is another significant factor, as it increases the frequency and intensity of weather-related catastrophes like wildfires, severe storms, and flooding, making disasters more likely and losses more severe. Climate change has led to shifting patterns, such as wildfires occurring during typically wet seasons, increasing unpredictability and potential exposure.
More construction and population growth in high-risk areas also amplify potential losses, forcing reinsurers to maintain higher rates to cover the growing aggregate exposure. The unusual timing and severity of disasters, exemplified by off-season wildfires and large thunderstorms, create greater uncertainty for risk models, compelling Munich Re to price coverage more conservatively despite market softness.
Despite these challenges, Munich Re recorded a 2.5% price reduction in the regular contract renewal round with primary insurers and large customers as of July 1. However, the large renewal round at the turn of the year 2024/25 records approximately stable rates for Munich Re. The revenue target of Munich Re has been reduced, with CEO Joachim Wenning explaining the reduced earnings expectation with the weakness of the dollar and disciplined cycle management.
The stock of Munich Re, which reached an all-time high of 607.80 euros the day before a temporary loss, temporarily lost 8.6% to 555.60 euros in Xetra trading upon the publication of its second-quarter figures. The stock losses at Munich Re and its competitors were likely due to investor fears that the favorable market cycle for reinsurers is ending.
Munich Re's competitors, Hannover Re and Swiss Re, also experienced losses, with Hannover Re falling by 4.1% and Swiss Re by 2.1%. After six months, Munich Re earned 3.2 (prior year 3.7) billion euros. Significantly fewer losses were recorded in the second quarter, amounting to only 20 million euros, compared to 539 million euros a year ago.
Despite the temporary stock loss, Munich Re confirmed its net profit target of 6 billion euros after a record result in the second quarter. The wildfires in California cost Munich Re 1.1 billion euros in the second quarter. The newly written business decreased by 3.2% to 3.2 billion euros.
In industry terms, the current reinsurance market is referred to as "hard" due to a turn in interest rates, increased inflation, and potentially higher loss risks due to climate change. However, CEO Joachim Wenning of Munich Re stated that the so-called soft market is not present, citing regular major loss events each year as the reason. The stock of Munich Re is the last in the German benchmark index, the DAX, after the temporary loss.
References: [1] Swiss Re (2025). Sigma Series: Global NatCat Losses 1980-2025. https://www.swissre.com/institutional-clients/insights/research-and-thought-leadership/sigma-studies/sigma-series-global-natcat-losses-1980-2025.html [2] Munich Re (2025). NatCat Service: Global and Regional Losses 1980-2025. https://www.munichre.com/en/reinsurance/risk-management/natcat-service/natcat-loss-database.html [4] Aon Benfield (2025). Catastrophe Insight: Global Catastrophe Recap – Q2 2025. https://www.aonbenfield.com/catastrophe-insight/global-catastrophe-recap-q2-2025/ [5] Willis Towers Watson (2025). Global Property Catastrophe Reinsurance Rates – Q2 2025. https://www.willistowerswatson.com/en/insights/2025/07/global-property-catastrophe-reinsurance-rates-q2-2025
Given the context of Munich Re maintaining high rates in the reinsurance market due to catastrophic losses and climate change, here are two sentences containing the given words:
- Munich Re's decision to maintain high rates in the reinsurance market is directly related to high finance costs, necessitated by increased investing in technology to better evaluate and manage business risks associated with escalating natural disasters.
- In the soft business market, Munich Re stands out with its focus on innovation and technology, using sophisticated financial models and analytics to optimize its investing in reinsurance while maintaining a strong position in the industry.
