Fitch Ratings has changed its outlook on Hannover Re, one of Europe’s big four reinsurers, and its subsidiary E+S Rückversicherung AG (E+S Re) from Stable to Positive, while maintaining both companies’ Insurer Financial Strength (IFS) Ratings at ‘AA-’.
The decision reflects Fitch’s assessment of Hannover Re’s financial resilience, strong capitalisation and competitive standing in the international reinsurance market.
According to Fitch, the revised outlook reflects expectations that Hannover Re will continue to demonstrate very strong capitalisation and financial performance over the next 12 to 24 months, even as market conditions become more challenging amid heightened competition and softening. The agency said the ratings remain supported by the group’s established market position, diversified operations and track record of profitability.
Fitch identified Hannover Re’s scale, competitive position and geographical reach as important strengths. The group operates across property and casualty (P&C) and life and health (L&H) reinsurance, with the former accounting for around 70% of reinsurance revenue in 2025 and the latter contributing approximately 30%. Fitch noted that disciplined underwriting and a comparatively low cost base enable Hannover Re to manage its underwriting capacity selectively and maintain profitability as market conditions become less favourable.
Capital adequacy remains a central factor in Fitch’s assessment. Hannover Re reported a Solvency II (S2) ratio of 254% at the end of the first half of 2026, compared with 256% at the end of 2025 and 261% at the end of 2024. Despite the gradual decline, the ratio remains well above the group’s minimum target of 200%.
Fitch attributed Hannover Re’s ability to expand its risk exposure and increase distributions to shareholders over the past three years to its strong operating capital generation. The agency assigned the group a ‘Very Strong’ score under its Fitch Prism Global capital model at the end of 2025 and expects its capital position to remain robust over the medium term, including during periods of more difficult market conditions.
The agency also estimated Hannover Re’s financial leverage ratio (FLR) at 17% at the end of June 2026, compared with 18% at the end of 2025. Fitch expects the ratio to remain within its 10%-23% benchmark range for the ‘aa’ rating category over the next 12 months.
Earnings consistency was another factor highlighted by Fitch. Hannover Re has historically generated higher net income returns on equity (ROE) than several other major European reinsurers. According to the agency, its earnings have also been relatively stable compared with those of its peers, supported by reserving practices and retrocession arrangements that help manage exposure to large losses.
Fitch further noted that Hannover Re’s lower structural cost base supports its competitive position and enables stronger premium growth than many peers at renewal periods. The agency expects these advantages to help sustain profitability and support capital strength as the reinsurance market adjusts to softer conditions.
Hannover Re’s financial performance remained strong during the first half of 2026, with Fitch-calculated ROE at 21%, matching the levels recorded in both 2025 and 2024. Fitch linked the results to improved underwriting performance and higher investment returns during a period of favourable market conditions.
Looking ahead, Fitch expects softer reinsurance market conditions in 2026 and 2027 to exert some pressure on underwriting earnings. However, the agency anticipates that the impact will be limited, citing Hannover Re’s ability to manage earnings volatility and maintain profitability across different market cycles.
The group’s P&C underwriting results also improved. Its reported net combined ratio fell to 83.2% in the first half of 2026, from 84.0% in 2025 and 86.6% in 2024. Fitch attributed the improvement to sound underlying margins and large losses remaining below budget.
Hannover Re recognises its full year-to-date large-loss budget during the year when actual large losses remain below budget. According to Fitch, this accounting approach produces a more conservative combined ratio calculation. The agency considers the company’s target of keeping its combined ratio below 87% in 2026, unchanged from the 2025 target, achievable. Meanwhile, L&H reinsurance margins remained broadly stable throughout 2025 and the first half of 2026, placing them towards the stronger end of the European reinsurer peer group, according to Fitch.
Reserve strength also contributed to the rating assessment. Fitch considers Hannover Re to have one of the strongest reserving positions among global reinsurers, citing favourable development in prior-year reserves and a substantial surplus of held reserves over best-estimate liabilities.
