Big four to deliver earnings growth in 2025 despite LA wildfire losses: Moody’s

Despite sizable claims from the LA wildfires in January, Moody’s anticipates strong earnings prospects for the four largest European reinsurers, Munich Re, Swiss Re, Hannover Re, and SCOR, in 2025, driven by persistently strong demand for reinsurance and robust investment returns.

According to Moody’s, the LA wildfire losses, estimated at between $30 billion and $50 billion in total, have already absorbed around 39% of the reinsurers’ combined annual catastrophe budget.

“This will make it harder for the companies to remain within their budgets for 2025, as catastrophe claims typically do not peak until the US hurricane season gets underway during the third quarter,” the firm explained.

However, Hannover Re, Munich Re, and Swiss Re have reportedly increased their 2025 net income targets by an average of 20% and have not adjusted them due to the LA wildfires, which Moody’s says reflects anticipated earnings growth across all lines of business.

On SCOR, the rating agency said the French reinsurer should also report significant earnings gains in 2025, assuming catastrophe losses remain broadly within budget, and that there is no recurrence of the negative one-offs that affected its Life and Health operations in 2024.

“Reinsurers will absorb losses from the January 2025 Los Angeles wildfires. However, with three of the four groups raising their combined annual net income target by 20%, we expect them to deliver revenue and earnings growth in 2025, assuming no additional major catastrophes,” Moody’s added.

The rating agency additionally noted that while prices softened during the January contract renewals, terms and conditions remained tight.

Moody’s further stated that reinsurers are likely to maintain discipline in 2025, resisting underpriced business.

“We expect reinsurers to resist writing underpriced business throughout 2025 and beyond. The companies’ overall catastrophe risk exposure remained stable during 2024 after several years of growth, and their appetite for US casualty risk has diminished,” the rating agency said.

Moody’s concluded, “Insured catastrophe losses remained above average in 2024, but reinsurers absorbed a lower share of them, reflecting higher deductibles and a greater contribution to total losses from secondary perils.”

“While prices have softened slightly, reinsurance contract terms remain favorable to reinsurers, supporting our positive outlook on the sector.”

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