Europe’s reinsurers look like they’re settling into a steadier earnings rhythm after years of swingy results. Cat losses still drive most of the volatility, but the bank argues the sector is learning how to smooth the ride, according to J.P. Morgan.
Reinsurers don’t usually take the bulk of expected catastrophe hits, yet those events create the biggest year to year noise.
The industry stumbled into 2025 on weak ground after the Los Angeles wildfires blew past normal Q1 expectations. Then the tide flipped.
Q2 and Q3 2025 ran far lighter than usual. Companies reporting so far show Q3 cat losses running well under internal budgets.
The Atlantic hurricane season also fizzled compared with early forecasts. What was supposed to be a heavy season turned into something tame.
That leaves reinsurers lined up for unusually strong quarterly profits.
J.P. Morgan said many firms are intentionally muting that upside so they can strengthen future earnings. Back in September, the bank flagged that a quiet hurricane season would let companies boost reserves and reinforce long term profitability.
According to Beinsure, that move has become a hallmark for reinsurers trying to appeal to long horizon investors.
The reinsurance sector has always battled sharp pricing cycles and big swings from natural hazards. J.P. Morgan argues it’s now working toward a more predictable structure.
- Munich Re shows one example. Its normalised combined ratio often pops higher in Q4 than in earlier quarters, a pattern the bank reads as a long running habit of tempering late year results when conditions are favourable.
- SCOR historically looked different, posting Q4 figures that lined up more with full year trends. The bank sees that as less active management of late year earnings.
- Hannover Re realised €260mn of losses in its fixed income portfolio to raise expected yields, and it may do more in Q4 if conditions stay favourable.
But starting in early 2024, SCOR shifted tactics. It began using strong periods to build reserve cushions, giving itself more flexibility when markets cool or volatility kicks up.
J.P. Morgan said that change puts SCOR closer to peers who already operate with a heavier focus on stability.
The bank also highlighted signs within Q3 2025 results that reinsurers seized on the mild cat backdrop to strengthen balance sheets.
Munich Re has already hit 85% of its €6bn 2025 earnings target after 9 months. With a quarterly net income around €1.5bn, it could blow past that goal. Instead, the company is adding to reserves and realising fixed income losses to bolster future investment returns.
J.P. Morgan said SCOR and Swiss Re still sit earlier in this shift, but the direction is obvious. Europe’s reinsurers are steering toward steadier, more durable earnings, helped this year by a mild catastrophe environment and a willingness to sacrifice short term gains for long term strength.
Global reinsurance market has entered a post-peak pricing phase, with earnings expected to moderate in 2025-2026.
Even as rates soften, the ratings agencies maintains a stable outlook on the reinsurance sector, pointing to strong capitalization, underwriting discipline, and sustained profitability above the cost of capital, according to S&P and Beinsure`s data.
Despite pressure to broaden coverage and lower attachment points, S&P noted that underwriting discipline across the global reinsurance industry has remained intact, and reinsurers have retained strong capitalisation.
The sector’s operating performance is expected to remain strong through 2026. While natural catastrophe events weighed on H1 2025 results, reinsurers are on track to meet their cost of capital for the year, and S&P anticipates similar outcomes in 2026.
The global reinsurance sector has undergone a notable transformation since the market reset in 2023, drawing sustained attention from investors and analysts.
Rather than a surge of new start-up reinsurers, capital has returned through more deliberate channels, according to AM Best.
