Credit ratings agency Moody’s Ratings has upgraded the insurance financial strength rating (IFSR) to Aa2 from Aa3 and the subordinated debt ratings to A1(hyb) from A2(hyb) for Munich Re, one of the world’s largest reinsurance companies.
Simultaneously, the IFSR of Munich Reinsurance America, Inc. (Munich Re America) has been upgraded to Aa2 from Aa3. The outlooks on both entities have been changed to stable from positive.
According to Moody’s, these upgrades reflect Munich Re’s “very strong” balance sheet, and continued improvement in the group’s diversification to reduce its reliance on the property and casualty (P&C) reinsurance segment.
Moody’s expects margins to contract but remain healthy amid market softening, driven by Munich Re’s “willingness to sacrifice premium growth for bottom line profitability.”
Moody’s commented, “Munich Re’s operations span a wide geographic footprint and are well balanced between life and P&C segments. This dual diversification – by region and by product line – enhances the group’s resilience and supports lower volatility in performance across varying market conditions. It also reduces the reliance on the P&C reinsurance segment.
“In 2025, the main contributors of the group’s revenues were ERGO Group AG (primary insurance business, 36%), followed by P&C reinsurance (30%) and life and health reinsurance (20%). These are further augmented by Munich Re’s global specialty business (14%).”
Moody’s believes that the decline in P&C reinsurance results will be partially offset by a growing contribution from the life and health reinsurance segment and improving investment returns. Overall, the group is expected to report a return on capital of at least 9% in the coming years.
The indicator for Munich Re’s very strong capitalisation as assessed by Moody’s is evidenced by a Solvency II ratio of 292% as of March 31st, 2026. The reinsurer reports a higher ratio than its peers, making up for the group’s higher exposure (relative to capital) to peak events, such as North American hurricanes, which remains Munich Re’s largest single loss event, explained Moody’s.
Moody’s added, “Munich Re’s capital base is not expected to grow materially given the group’s increased dividends and share buybacks, we expect Munich Re to continue to consistently operate with a very high level of capital and a Solvency II ratio above 250%. At the same time, we do not expect net exposures to natural catastrophes to increase materially.
“We estimate that Munich Re’s exposure to peak catastrophic events as a percentage of own funds, went down in 2025, despite a reduction in retrocession protection. This was a result of a weakening of the US Dollar against the Euro currency but also of the non-renewal of some policies.”
Additionally, redundancy in P&C reserves also supports the strength of the group’s balance sheet. Despite further strengthening US casualty reserves, the magnitude of the cumulative strengthening in the last few years was materially lower than peers, according to the report.
However, the reinsurer has consistently released reserves overall every year in the last 12 years, demonstrating the strong level of reserve adequacy.
In 2025, Munich Re reported a net income of €6.1 billion, equivalent to a return on capital (RoC, Moody’s calculations) of 10.7%, up from €5.7 billion in 2024 (10.6% RoC). These results were supported by a favourable reinsurance pricing environment, and a relatively low level of natural catastrophic claims.
The rating upgrade for its subsidiary, Munich Re America, reflects strong explicit and implicit support from Munich Re and the strategic importance of the US operations to the overall group, says Moody’s.
“These strengths are offset by historically weak operating results, significant catastrophe exposure (gross of retrocessions to the ultimate parent) and reserving risk given the high proportion of long-tail casualty lines.
“Munich Re has historically provided significant retrocession protection and capital contributions to Munich Re America, which have helped offset underwriting losses,” said the rating agency.
