Positive Earnings Outlook for Major European Reinsurers
Despite the significant claims arising from the Los Angeles wildfires in January, Moody’s projects a promising earnings trajectory for Europe’s four largest reinsurance companies: Munich Re, Swiss Re, Hannover Re, and SCOR, by the year 2025. This optimistic forecast is driven by a sustained demand for reinsurance and solid investment returns.
Moody’s estimates that the total losses from the LA wildfires range between $30 billion and $50 billion, consuming approximately 39% of the reinsurers’ collective annual catastrophe budget. “This scenario challenges the companies to stay within their budgets for 2025, especially as catastrophe claims typically surge during the US hurricane season in the third quarter,” Moody’s explained.
Nevertheless, Hannover Re, Munich Re, and Swiss Re have increased their 2025 net income targets by an average of 20%, showing no adjustments due to the LA wildfires. Moody’s interprets this as a reflection of expected earnings growth across all business lines.
SCOR’s Anticipated Earnings Surge
For SCOR, the French reinsurer, Moody’s anticipates substantial earnings growth in 2025, provided catastrophe losses stay within budgetary limits and no repeat of the adverse one-off events that affected its Life and Health divisions in 2024 occurs. “Reinsurers will shoulder the losses from the January 2025 Los Angeles wildfires, but with three of the four entities elevating their annual net income target by 20%, we foresee revenue and earnings growth in 2025, assuming no further major catastrophes,” added Moody’s.
The rating agency further observed that although prices softened during the January contract renewals, the terms and conditions remained stringent.
Discipline in Underwriting to Continue
Moody’s also mentioned that reinsurers are expected to maintain underwriting discipline in 2025 by avoiding underpriced business. “We anticipate reinsurers to abstain from engaging in underpriced business throughout 2025 and beyond. The overall catastrophe risk exposure for these companies remained stable in 2024 after several years of growth, and their interest in US casualty risk has decreased,” the rating agency remarked.
Moody’s concluded, “Insured catastrophe losses were above average in 2024, yet reinsurers assumed a smaller share of these losses, thanks to higher deductibles and a more significant contribution to total losses from secondary perils.”
“While there has been a slight softening of prices, reinsurance contract terms continue to favor reinsurers, reinforcing our positive outlook on the sector,” Moody’s summarized.
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