European reinsurers recorded steady first-quarter 2025 results, with property and casualty (P&C) earnings under pressure from large losses, primarily stemming from the Los Angeles wildfires.
Despite the elevated claims, net income was supported by core P&C performance, stronger life and health (L&H) contributions, and consistent investment returns.
Fitch Ratings said the four leading European reinsurers remain on track to meet their 2025 objectives. The agency cited growing earnings diversification, robust capital positions, and reserve adequacy as key factors insulating the sector from future shocks in underwriting, investment, or macroeconomic conditions.
Fitch noted that P&C combined ratios deteriorated to 87.2% from 82.4% in Q1 2024, with SCOR the only reinsurer to remain within full-year targets. SCOR’s relatively lower exposure to the LA wildfires and other natural catastrophes was a contributing factor. Estimated annual natural catastrophe budget usage ranged between 27% and 36%.
Fitch added that normalized combined ratios remained aligned with year-end expectations. Discounting effects, driven by the high proportion of US-based claims, provided a notable benefit to combined ratios, ranging from 8% to 10%.
In an earlier report, Fitch noted that the four largest European reinsurers – Munich Re, Swiss Re, Hannover Re, and SCOR – reported an average return on equity (ROE) of 13.7% in 2024, down from 17.1% in 2023.
The four companies recorded a record-low average combined ratio of 86.3% in P&C reinsurance for the year, a 1.0 percentage point improvement from 2023. Fitch attributed this to stable pricing levels and a relatively benign large-loss environment.
In the L&H segment, reinsurers saw improvements across the board in Q1 2025, underpinned by ongoing releases from the contractual service margin (CSM). Munich Re and Hannover Re saw gains from favorable experience variances.
CSM levels rose for all but Hannover Re, which was affected by currency movements and other adjustments. Munich Re’s new business CSM exceeded its release level, pointing to expected future earnings.
Fitch reported that investment income remained solid, buoyed by higher reinvestment yields and realized gains. Negative fair-value adjustments weighed on performance but were offset by recurring income.
Average return on investment (ROI) improved slightly to 3.7% from 3.5% in Q1 2024. The weakening of the US dollar presented a headwind to overall profitability, with Swiss Re as the exception due to its US dollar reporting.
Solvency metrics continued to show resilience. Operating capital generation offset the effects of new business and capital management activities, allowing reinsurers to maintain capital levels at or above the upper bounds of their target ranges.
Fitch said this could enable future capital returns or targeted acquisitions. Financial leverage remained low across the group, with expectations for a further decrease at Munich Re and Hannover Re over the coming quarters.
Reinsurers also experienced more competitive dynamics during the April renewals. Fitch noted a modest softening in pricing and largely unchanged contract terms, mirroring conditions seen in January. Companies continued to refine their portfolios, focusing on selective growth in segments like specialty lines and structured reinsurance.
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