Wildfires in California: Reinsurers face billions in losses!

Wildfires in California: Reinsurers face billions in losses!

In the first quarter of 2024, reinsurer Munich Re suffered a 48% decline in net profits, which fell to just under 1.1 billion euros. The main reason for this significant decline is the devastating forest fires in Los Angeles, which caused costs totaling 1.1 billion euros. Despite these difficulties, Munich Re's board of directors is consistently sticking to its profit target of six billion euros for the current year.

Hannover Re was also affected by the damage and reported a profit of 480 million euros, a decrease of 14% compared to the previous year. The destruction in Los Angeles resulted in costs of 631 million euros. The new CEO of Hannover Re, Clemens Jungsthöfel, has ambitious plans: He wants to increase profits this year to around 2.4 billion euros.

Increasing natural disaster losses in North America

North America has established itself as the continent with the highest natural catastrophe losses and is now the most important foreign market for Munich Re. Climate researchers warn of an increased risk of droughts and forest fires in the western United States. Munich Re also recorded a decline in investment income from 2.2 billion euros to 1.3 billion euros. The weak dollar contributed to the slump in profits, as the currency result fell from 277 million euros to minus 506 million euros.

Despite these challenges, Munich Re remains optimistic and expects continued positive business opportunities. The company considers the targets for 2025 to be valid. Hannover Re recorded a 4.5% increase in reinsurance sales to almost seven billion euros in the first quarter of 2025. However, Hannover Re's combined combined ratio deteriorated from 88 to 93.9%.

Challenges and expectations for the industry

The major losses at Hannover Re totaled 765 million euros in the first quarter, which significantly exceeds the originally estimated 435 million euros. For the year as a whole, Hannover Re is planning major losses of 2.1 billion euros and hopes not to exceed this amount. The situation highlights the challenges reinsurers face in the face of increasing natural catastrophes.

Overall, the reinsurance industry is facing difficult but also exciting times. While Munich Re is struggling with numerous challenges, the question arises as to how the companies in the industry will deal with the increasing risks in the long term. Loud Insurance magazine It is essential to continuously adapt the framework conditions and market strategies. Current developments show that companies like Munich Re and Hannover Re must prepare for accelerated reciprocal effects of the climate and the economy.

For more information about the financial impact of the California wildfires on reinsurers, see the article by Mirror.