J.P. Morgan, a global investment bank, notes that the European reinsurance sector appears to be moving toward a more stable and consistent earnings pattern.
The industry entered 2025 on weak footing after the Los Angeles wildfires pushed catastrophe losses above normal expectations in Q1. Conditions then shifted noticeably, with Q2 and Q3 producing losses well below what is typically assumed. J.P. Morgan highlights that the companies reporting so far show Q3 catastrophe losses coming in markedly under their internal budgets.
The Atlantic hurricane season, once expected to be stronger than average, ultimately proved far milder than forecasts. As a result, J.P. Morgan expects reinsurers to be reporting unusually strong quarterly profits.
J.P. Morgan also emphasises that many reinsurers are intentionally moderating this upside to reinforce future earnings strength. Back in September, the bank pointed out that a gentle hurricane season would give companies the opportunity to strengthen reserves and support future profitability.
J.P. Morgan views this behaviour as increasingly central to the sector’s effort to become more appealing to long-term investors. Reinsurance has traditionally been marked by sharp pricing cycles and large year-to-year variations in claims, especially from natural hazards, but J.P. Morgan believes the industry is moving toward a more reliable foundation.
As one example, J.P. Morgan notes that Munich Re has often reported a higher normalised combined ratio in Q4 compared with the first nine months of the year. Although multiple factors can influence this pattern, the bank interprets it as evidence of a long-held preference to temper late-year earnings during favourable periods. SCOR’s long-run data looks different, with Q4 results more closely aligned to the rest of the year, which J.P. Morgan takes as a sign of less active management of fourth-quarter results.
However, since early 2024, SCOR has adopted a new approach, using strong performance periods to build reserve buffers. J.P. Morgan believes this gives SCOR far greater flexibility when the cycle softens or when market conditions become more volatile.
J.P. Morgan also points to several examples within Q3 2025 results where reinsurers used the mild catastrophe environment to strengthen balance sheets. Hannover Re realised €260m of losses in its fixed-income portfolio to improve expected investment yields, with the possibility of doing more if Q4 turns out better than projected.
Munich Re has already met 85% of its €6bn 2025 earnings target by the nine-month mark, and with a run rate of roughly €1.5bn in quarterly net income, it could exceed that target comfortably. Instead, J.P. Morgan reports that the company is choosing to add to reserves and realise fixed-income losses to support stronger investment returns in future years.
According to J.P. Morgan, SCOR and Swiss Re are earlier in this shift toward the level of prudence shown by Munich Re and Hannover Re, but the underlying direction across the European reinsurance industry is becoming clearer: the sector is progressively shaping a more stable and resilient earnings path for the years ahead.
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