Munich Re Slashes Catastrophe Cover by 60% in Bold Gamble as Hurricane Season Opens
02.06.2026 - 08:42:02 | boerse-global.de
Munich Re posted a first-quarter profit of €1.714 billion, a 57% surge from a year earlier, yet its shares have tumbled to a 52-week low of €446.70 – 26% below the August 2025 peak and down more than 12% in the past 30 days. The disconnect between stellar earnings and a sinking stock price reflects deep unease about the risks the reinsurer is now taking directly onto its own balance sheet.
The company has slashed its external catastrophe protection by more than 60%, reducing retrocession coverage from $1.55 billion to just $600 million. Both of its sidecar vehicles, Eden Re and Leo Re, have been wound down, and the in-house Queen Street 2023 catastrophe bond was allowed to expire without renewal. These structures had previously enabled Munich Re to share extreme disaster risks with third-party investors. Now it is retaining that risk itself, backed by a Solvency II ratio of 292% – nearly 50 percentage points above its internal target. Market observers view the move as a vote of confidence in the group’s capital strength.
The timing is deliberate: the Atlantic hurricane season officially began this week. Munich Re expects 12 to 13 named storms in the North Atlantic, with five to six reaching hurricane strength – below the 30-year average of 15.6 storms. El Niño’s increased wind shear over the Atlantic is the main factor dampening activity. However, the West Pacific tells a different story: 27 named storms, 18 typhoons and 11 severe typhoons forecast, all above the long-term norm. The risk shift is concentrated on Japan, greater China and Korea. Climate expert Anja Radler cautioned that fewer storms are no guarantee of lower damage – a single landfall in a densely populated coastal area can still inflict catastrophic losses.
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Against this backdrop, pricing pressure in the core reinsurance business is squeezing volumes. At the April 1 renewal round, Munich Re’s written premium fell 18.5% to €2.0 billion as it refused to renew contracts that did not meet its required pricing and terms. Risk-adjusted rates dropped 3.1%. The group expects the July renewal season to broadly hold current pricing levels, but the market remains soft.
The first-quarter financials provide some cushion. The combined ratio in property-casualty reinsurance improved to 66.8% from 83.9%, helped by exceptionally low natural catastrophe losses of just €55 million. Management reaffirmed the full-year net profit target of €6.3 billion, contingent on normal catastrophe experience for the remainder of 2026.
Munich Re has launched a €2.25 billion share buyback program, with an initial €900 million tranche started on May 14 and running until at least August 21. In the first six trading days, it repurchased roughly 471,000 own shares for about €225 million. Yet the stock still fell 14.44% in May, the worst performance among DAX components.
The half-year results are due on August 7, by which time the early trajectory of both Atlantic and Pacific storm seasons will have shaped sentiment more decisively. Munich Re is betting that a mild hurricane season will vindicate its decision to hold more risk – but if nature forces a different hand, the bill will land squarely on the group’s own books.
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