Reinsurers warn of increasing climate risks despite falling premiums

Since the weekend, the focus in Monaco has once again been on insurance premiums, risk shares and loss limits: the traditional industry meeting is currently taking place in Monte Carlo in Monaco, at which reinsurers and primary insurers negotiate the conditions for contract renewal at the turn of the year.

And as always, reinsurers are trying to make primary insurers and the public aware of the high risks, particularly from natural catastrophes.

“Climate change is becoming increasingly noticeable”

With the climate-related events of the past few months, they also have strong arguments. The world market leaders Munich Re, Swiss Re and Hannover Re warned of growing dangers such as floods, droughts, hail, severe thunderstorms and forest fires. In the long term, they led to possible higher claims burdens and growing demand for reinsurance protection.

The recent heat waves also “increasingly developed into economic risks,” said Munich Re. The effects of climate change are becoming “increasingly noticeable”.

Forest fire damage is constantly growing

Forest fires are the fastest growing weather risk worldwide, said Swiss Re. In Europe, insured forest fire damage has increased by an estimated eight to eleven percent per year in recent decades. This risk continues to grow, wrote Swiss Re, "because more and more people and assets are located in areas at risk of forest fires."

Despite the undisputedly high major risks, the prices for reinsurance protection in property and casualty business have been falling again since 2025. After a sharp increase in previous years, they are still at a high level.

Premiums are likely to continue to fall

In recent years, however, the catastrophe damage has fallen short of the greatest fears. Reinsurers' profits rose correspondingly, meaning that experts see them in a less favorable negotiating position. The trend towards further falling premiums is likely to continue.

For example, insurance losses from this year's major forest fires in Europe remained manageable. Munich Re explained this in Monte Carlo by saying that the fires only affected rural regions and not larger residential or industrial areas.

According to a survey by the rating agency Moody's, 86 percent of the primary insurers surveyed expect a further decline in prices. When it comes to property insurance for residential buildings, industrial plants and cars, most people even expect discounts of more than 7.5 percent. Hannover Re boss Clemens Jungsthöfel also expects prices to fall slightly on January 1st, but wants to keep the other conditions “predominantly stable”.

Primary insurers have performed better recently

The falling reinsurance prices are a key reason why the shares of primary insurers such as Allianz and Generali have performed better than those of reinsurers in recent months.

Reinsurers are the insurers in the insurance industry. Primary insurers pass on part of their risks to them and in return pay them part of the premiums collected. This means that the risks from major losses are spread across several insurers. The "Rendez-Vous de Septembre" in Monte Carlo is the most important meeting in the industry and is taking place for the 68th time this year.

DAX gives in

On the German stock market, the shares of the world market leader Munich Re and the third-party Hannover Re are losing at an above-average rate.

Overall, the DAX is starting the new week weaker again after the recent stabilization. High oil prices continue to weigh on prices. In addition, Wall Street is no longer a source of inspiration due to the Labor Day holiday. By the early afternoon, the DAX had lost 0.4 percent to 25,940 points.