Munich Re pulls-back at July, says prices, T&Cs can be “largely upheld” at Jan 2027 renewals

Munich Re, the reinsurance giant, said that it systematically opted not to renew certain business at the mid-year renewals particularly in property excess-of-loss, but the company forecasts favourable prices, as well as terms and conditions, can be “largely upheld” at the next significant renewal round, at January 1st 2027.

This morning, in announcing its first-half 2026 results, Munich Re has revealed a record high level of profit of almost EUR 4 billion (EUR 3.925bn to be precise, soundly beating the prior years EUR 3.178bn).

The second-quarter net result was EUR 2.2 billion, which causes the reinsurance firm to maintain its full year guidance for a EUR 6.3 billion profit for 2026.

Good operating performance across all business segments has been seen, while major losses in property and casualty reinsurance have been particularly low, helping to drive greater profitability for Munich Re this year.

The P&C reinsurance combined ratio came out at only 68.9%, indicating a highly profitable underwriting period for the company.

This relatively benign loss environment has enabled the major reinsurance firms to extract more profits from what was still relatively high-priced underwriting business, just as the market softening accelerated. Whether profit figures can be repeated next year, even if losses remain less severe, will remain to be seen.

Munich Re CEO Christoph Jurecka commented on the results, “With an excellent half-year result of €3.9bn, Munich Re is well on track to achieve its annual target of €6.3bn. Thanks to our strong balance sheet, higher investment income and rising profit contributions from our less volatile business segments, we are able to manage the market cycle in property-casualty reinsurance from a position of strength. We deliberately opt not to take on business where prices would not be risk-commensurate, while remaining a reliable long-term partner to our clients, even after the largest of loss events. These strengths underline our ambition to achieve a return on equity of over 18% and an average annual increase in earnings per share of more than 8% by 2030.”

H1 2026 insurance revenues surpassed the EUR 30 billion mark (at EUR 30.853bn) when adjusted for currency effects. But the technical result and operating result were both down for the second-quarter of this year, after an exceptional result in that quarter of 2025.

Annualised return on equity stood at 25.5% in Q2 2026 and 23% for H1, up on the H1 2025 ROE of 19.7%.

In P&C reinsurance, the net result was slightly ahead of the prior year, although insurance revenue from contracts dropped which could be a signal of the softened market, as well as Munich Re demonstrating selectivity.

Major losses of just EUR 191 million for Q2 2026 were only 4.9% of net insurance revenue, well below the expected value of 18%, underscoring another benign period for the major global reinsurers.

At the July reinsurance renewals Munich Re navigated the soft market conditions and as a result the volume of business written fell by 9.1% to EUR 2.9 billion.

“Munich Re systematically opted not to renew or write business that did not meet expectations with respect to the required prices or terms and conditions,” the reinsurer explained, adding that “Falling prices also reduced the volume.”

But importantly Munich Re clarified that, “Owing to largely stable contractual terms and conditions, the quality of the portfolio remains high.”

That is the key point in most of the major reinsurance firms commentary during this reporting season, that while pricing is down, a selective approach can still construct portfolios with an attractive potential risk-adjusted return, given the attachment points and terms have remained mostly stable so far. A positive read-across for ILS manager portfolios as well, where selectivity is also key.

Munich Re further commented on the July renewals, “Overall, prices showed a downward trend. Nevertheless, it was mostly possible to compensate for higher loss cost estimates in some areas, which were primarily attributable to inflation or other loss trends. Overall, the price level for Munich Re’s portfolio remains good, despite a 5.5% decline. These figures are, as always, risk-adjusted. Accordingly, changes in pricing based on revised risk and loss expectations are factored in.”

Overall, Munich Re said that margins on renewal business remain attractive, despite the softening reinsurance trends, as prices are declining from their previously very high levels.

Year-to-date, across the January, April and mid-year renewals, Munich Re reports its prices as declining 3.1%.

Portfolio quality has been maintained, with “largely unchanged terms and conditions as well as structures.”

The volume decline is down to prices and also “disciplined cycle management,” the reinsurance firm said, as Munich Re pulled-back from business it deemed offered inadequate returns, offset by new business opportunities that it says will support top and bottom lines.

In volume terms, at the July reinsurance renewals, Munich Re said that property and casualty excess-of-loss were the areas where its premium volumes declined the fastest, over 20% in both cases as it gave up business that it deemed not likely to be profitable enough to meet its hurdles.

Property excess-of-loss was also the area where prices declined the fastest, its reporting shows.

CEO Jurecka said this morning that, “Disciplined underwriting remains essential to maintaining the quality of our portfolio and navigating a temporarily more challenging market environment. Across the group, management incentives are not driven by top-line targets. In many cases, foregoing business is preferable to writing business in inadequate terms. While we, of course, value long-term client relationships.”

Jurecka also noted that Munich Re has the flexibility to walk away from business if it chooses, given its scale and diversification.

But he did also note that, “Over the medium term, we see a compelling case for P&C reinsurance supply and demand becoming more evenly balanced again.”

Looking ahead though, Munich Re seems optimistic that returns can be maintained, if it remains selective in its approach.

Forecasting for the January 2027 reinsurance renewals that, “Munich Re expects a market environment in which the sustained favourable price levels as well as improved terms and conditions can be largely upheld despite the high level of competition.”

While also highlighting that, “As a broadly diversified insurance group, and owing to the steady expansion of less cyclical and less volatile business segments in recent years, Munich Re is also strategically very well positioned for softer market phases in property-casualty reinsurance.”

The reinsurance giant is clearly hoping that discipline will continue to largely hold at January 2027’s renewal round, a critical juncture for the portfolios of the major reinsurers such as itself.

Munich Re maintains its full-year profit target of EUR 6.3 billion, but it has reduced its forecast for reinsurance revenues to EUR 38 billion, down from the previous forecast of EUR 40 billion.

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