Munich Re has identified a range of emerging risk factors that are shaping the global reinsurance landscape, with geopolitical tensions and macroeconomic volatility contributing to heightened uncertainty.
The company notes that fluctuating inflation rates and unpredictable trade tariffs are increasing the need for risk transfer solutions, and emphasizes that comprehensive expertise and a global approach are essential for reinsurers to address these challenges.
Risk management is being tested by the rising frequency and severity of natural hazard losses. Munich Re reports that since 2020, annual insured losses from natural hazards have consistently exceeded US$100 billion, with insured losses in the first half of 2025 reaching US$80 billion and overall economic losses at US$131 billion.
The company highlights that, in addition to major disasters, a growing number of medium-sized events – such as severe thunderstorms, floods, and wildfires – are now a significant source of aggregate losses. For example, severe thunderstorms with tornadoes in the United States generated economic losses of approximately US$34 billion in the first half of the year.
The first quarter of 2025 saw global natural catastrophe losses reach at least US$110 billion, nearly double the 10-year average for the period, according to Gallagher Re. Of that total, US$56 billion was covered by private insurers or public insurance entities, which is 176% higher than the decade-long Q1 average.
The January wildfires in the Los Angeles area were a major contributor to these figures, and while the insurance industry absorbed the impact, the early tally marks one of the costliest starts to a year on record.
Munich Re notes that the insurance industry has maintained robust capital levels, with traditional reinsurance capital growing by an average of 5.6% annually over the past eight years. The company continues to update risk models to reflect changes in hazard patterns and claims development, particularly as climate change alters the frequency and intensity of events.
“Our clients can rely on long-term capacities: Even after a mega event, such as an extremely powerful hurricane with an unprecedented market loss of well over US$100 billion, our solvency ratio would still be well above the upper end of our target corridor of 220%,” said Stefan Golling (pictured above, left), a member of Munich Re’s board of management.
The impact of these losses is reflected in reinsurer financials. Fitch Ratings reported that non-life reinsurers’ combined ratio rose to 92.7% in the first half of 2025, up from 88.3% in the same period of 2024, with much of the increase attributed to wildfire losses in California.
The report also noted that profitability is expected to come under pressure as the reinsurance market softens, even as pricing remains sufficient to support positive returns.
“For the January renewals, we continue to expect a market environment that offers attractive business opportunities. Overall, there should be a good balance between the capacity on offer and the continued increase in demand. Reinsurance is and will continue to be the decisive protective shield for national economies against major risks,” said Munich Re board member Thomas Blunck (pictured above, right).
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