Europe's four largest reinsurers delivered record profitability in the first half of 2026, even as their combined revenues shrank and property and casualty pricing continued to fall. The results raise a question that Fitch Ratings addresses directly in a new report: how long can margins hold?
Munich Re, Swiss Re, Hannover Re, and SCOR reported an average return on equity of 21.5% in 1H26, matching the record set in the same period last year. Their average P&C reinsurance combined ratio improved to 76.9% from 81.5% in 1H25, beating full-year targets for all four. But Fitch is explicit that this level of profitability is unlikely to be sustained. Several consecutive rounds of price reductions at renewals have not yet fully fed through to earnings, and the agency expects that effect to become more pronounced in coming quarters.
Two factors flattered the combined ratio improvement in ways that will not automatically repeat. The first was an unusually quiet nat cat first half: global insured losses were approximately US$45 billion (€38.5 billlion) in 1H26, the lowest since 2020 and less than half the US$100 billion (€85.5 billion) recorded in 1H25. The peer group used only 36% of its nat cat budget for the period. The second factor was accounting: IFRS 17 discounting reduced reported combined ratios by close to 11 percentage points on average in 1H26 - the largest such benefit since companies began reporting under the standard. Strip both out and the underlying picture is more muted.
Nat cat pricing at mid-year renewals fell 20% to 25%, accelerating from declines in the mid-teens at the January renewals. The four reinsurers responded differently. Munich Re deliberately reduced its P&C volume by 9.1% at the July renewals, walking away from business that no longer met its risk-return thresholds. Swiss Re and Hannover Re took the opposite approach, growing by 11% and 12.3%, respectively, by selectively adding business that still met their profitability targets.
That divergence has a downstream consequence. Munich Re cut its full-year reinsurance revenue guidance by €2 billion to €38 billion after the July renewals, while holding its full-year net profit target of €6.3 billion unchanged. The revenue cut is a signal that softening prices are now material enough to affect planning assumptions - even for the most profitable reinsurer in the peer group.
One area where the four reinsurers are moving in different directions is US casualty - a class where reserve uncertainty has been elevated across the industry. According to the Fitch report, Munich Re and SCOR are actively reducing their US casualty exposure, concerned about the adequacy of pricing given long-tail development risk. Hannover Re is taking the opposite position, finding selective growth opportunities in the same class. The divergence reflects genuine uncertainty about whether current US casualty rates are adequate. That question will not be answered until losses develop over the next several years.
As P&C revenue contracted by 9.4%, life and health reinsurance provided a partial offset. Aggregate L&H earnings rose 12% in 1H26, driven by steady contractual service margin releases and better-than-expected experience variance, notably in US mortality. Munich Re, Swiss Re, and Hannover Re all met or exceeded their pro rata L&H annual targets.
The exception was SCOR. Its underlying L&H results were strong, but the reinsurer was required to pay US$488.3 million (€417.5 million) to Covéa following an arbitration ruling with the French insurer, producing a €49 million net hit. Adjusting for that one-off, SCOR's L&H margins remained stable, though still below the other three.
Munich Re went furthest in structural diversification, creating a dedicated Global Specialty Insurance segment in 2025 to reduce dependence on P&C reinsurance cycles. GSI revenue reached €4.2 billion in 1H26 and its insurance service result rose 3% to €540 million.
Investment returns improved across the peer group, with average reinvestment yields rising to 4.6% from 4.2%. That widened the gap between what the four reinsurers earn on new money and what their existing portfolios yield. That a gap has been gradually lifting recurring investment returns. The Fitch report notes that upside potential is diminishing as the gap narrows, meaning investment income is less likely to continue growing at the same rate. That matters because investment income has been absorbing some of the pressure from falling underwriting revenues.
Property catastrophe reinsurance capital reached a record $785 billion (€671.2 billion) at year-end 2025, and risk-adjusted rates fell 14.7% at January 1 based on Howden Re data, with further declines of 15–25% at mid-year renewals - the steepest pace of falls in years.That volume of capital, combined with benign losses, is the primary driver of the pricing pressure now working its way through the four reinsurers' revenue lines.
Despite the revenue headwinds, the four reinsurers maintained or increased their solvency positions. Munich Re's solvency ratio rose to 304%, the highest in the peer group. SCOR's improved to 220%, moving it toward the upper end of its 185% to 220% target range. Fitch's Insurer Financial Strength ratings for the group remain in the AA to A+ range.
Analysts project that property catastrophe pricing could floor around 2028 before recovering, with P&C reinsurance revenue growth for the sector forecast to bottom around 2027. For the big four, that timeline means at least two more renewal cycles of revenue pressure before conditions are likely to stabilise.
