Munich Re is best positioned to deal with the seasonal underperformance typically experienced by European reinsurers during the Atlantic hurricane season, according to JP Morgan.
Munich Re and Swiss Re typically have the largest share of hurricane losses among the European reinsurers. Munich Re and Swiss Re have historically incurred the highest share of losses from major hurricane events at around 4% and 3%. This is followed by Hannover Re at 1% and then SCOR at 0.5%.
SCOR, they say, is least prepared heading into hurricane season given the recent S&P outlook revision to “negative”, which may hold back capital returns, and make its natural catastrophe assumptions less reliable.
Reinsurers typically see weak share prices during Atlantic hurricane season, between June and the end of November.
This year is expected to be particularly active due to various factors including the La Niña conditions (less wind shear) and warmer than average sea surface temperature in the Atlantic basin which create favourable conditions for hurricane formation.
Above normal landfall impact is also expected along the US Gulf and East coasts this year with highest risks in July/August and September.
JP Morgan’s assessment says: “Despite taking a larger share of losses we remain comfortable with Munich Re going into hurricane season given the company’s track record. Munich Re has consistently delivered on both its earnings targets and paying dividends over the years.”
“In heavy years for hurricane losses, Munich Re achieved all its annual targets with the exception of 2008 (financial crisis) and 2017 which saw record annual cat losses of well over $100bn. The track record includes delivering on its earnings targets in years of major hurricanes Katrina (2005, ROE target met), Sandy (2012) and Ida (2021).”