Credit rating agency Moody’s raised Munich Re’s Insurance Financial Strength Rating (IFSR), one of the world’s largest reinsurance companies, to Aa2 from Aa3, and its subordinated debt rating to A1(hyb) from A2(hyb).
At the same time, Munich Re America’s IFSR was upgraded from Aa3 to Aa2. The outlook for both entities has been revised to stable from positive.
Moody’s said the upgrades reflected Munich Re’s “very strong” balance sheet and continued improvements in the group’s diversification to reduce reliance on its property and casualty (P&C) reinsurance unit.
Moody’s expects margins to contract but remain healthy amid weakening markets as Munich Re is “willing to sacrifice premium growth in exchange for bottom-line profitability.”
Moody’s comments: “Munich Re’s business covers a broad geographical scope and is well balanced between the life and P&C reinsurance segments. This dual diversification by region and product line strengthens the group’s resilience and supports lower performance volatility in different market conditions. It also reduces reliance on the P&C reinsurance business.
“In 2025, the main contributor to the group’s revenue is ERGO Group AG (primary business, 36%), followed by Property & Casualty Reinsurance (30%) and Life & Health Reinsurance (20%). These revenues are further enhanced by Munich Re’s global specialty business (14%).”
Moody’s believes that the decline in P&C reinsurance performance will be partially offset by the growing contribution of the life and health reinsurance business and improving investment returns. Overall, the group is expected to generate returns on capital of at least 9% over the next few years.
Munich Re’s Solvency II ratio was 292% as of March 31, 2026, demonstrating Munich Re’s very strong capital strength. Moody’s explains that the reinsurer’s reported ratios, which are higher than those of its peers, compensate for the group’s higher exposure (relative to capital) to peak events such as the North American hurricanes, which remain Munich Re’s largest single loss event.
Moody’s added: “Given the group’s increased dividends and share buybacks, Munich Re’s capital base is not expected to grow materially, and we expect Munich Re to continue operating at very high capital levels and a Solvency II ratio in excess of 250%. At the same time, we do not expect a material increase in net natural catastrophe exposure.”
“We estimate that Munich Re’s share of its own funds in peak catastrophe events will decline in 2025, despite reductions in retrocession protection. This is a result of the dollar weakening against the euro and a result of some policies not being renewed.”
In addition, redundancy in property and casualty insurance reserves also supports the strength of the group’s balance sheet. Although the U.S. casualty reserve has further strengthened, the cumulative increase over the past few years has remained significantly lower than that of other countries, the report said.
However, reinsurers have continued to release reserves in each of the past 12 years, demonstrating strong levels of reserve adequacy.
In 2025, Munich Re posted a net profit of €6.1 billion, equivalent to a return on capital (RoC, Moody’s calculation) of 10.7%, up from €5.7 billion in 2024 (10.6% RoC). These results were supported by a favorable reinsurance pricing environment and relatively low levels of natural catastrophe claims.
Moody’s said the upgrade in the rating of its subsidiary Munich Re USA reflects Munich Re’s strong explicit and implicit support and the strategic importance of the U.S. business to the entire group.
“These strengths are offset by historically weak operating results, significant catastrophe risk (total transferred to the ultimate parent), and retention risk given the high proportion of long-tail casualty coverage.
“Munich Re has historically provided substantial retrocession protection and capital contributions to Munich Re USA, which has helped offset underwriting losses,” the ratings agency said.
