Munich Re Emphasizes Traditional Reinsurance Amid Rising Risks

Munich Re said traditional reinsurance remains essential as insurers face increasingly complex risks from climate change, inflation, and cyber threats, despite periods of relatively low natural catastrophe losses.

Ahead of the Baden-Baden reinsurance meetings, the company emphasized the importance of reliable capital, risk expertise, and rapid claims payments as insurers confront rising exposures and interconnected threats.

"Periods of lower losses in natural catastrophes must not lead to complacency about the risks ahead," said Clarisse Kopff, member of Munich Re's Board of Management Responsible for property and casualty reinsurance in Europe and Latin America.

Munich Re reported that insured natural catastrophe losses in Europe have increased by an average of 5 percent annually since 1980, with growth accelerating over the past decade.

Traditional reinsurance capital has also increased relative to alternative capital, with the ratio rising from 3.5 in 2017 to nearly 4 in 2026. Munich Re said its ability to retain risk on its balance sheet allows it to provide capacity independently of retrocession arrangements.

The reinsurer cited its deployment of additional capital following the 2023 Turkey earthquake as an example of its ability to support markets following major catastrophes. After Germany's 2021 Bernd flooding, Munich Re paid some reinsurance clients within hours, with payments averaging 4.4 days.

Inflation presents another challenge, particularly in motor insurance. In Germany, spare parts costs increased 6.1 percent annually between 2017 and 2025, while medical costs rose 4.4 percent annually. Average insurance premiums increased just 2.2 percent annually during the same period.

Munich Re said its artificial intelligence-powered Insurance Analytics Platform helps insurers analyze portfolio exposures, identify claims trends, and improve risk pricing.

Cyber threats are also becoming more complex as artificial intelligence, geopolitical tensions, and digital interdependencies reshape exposures.

"Artificial intelligence, geopolitical tensions, and growing digital interdependencies are changing both the frequency and nature of cyber risk," said Patrice Michellon, chief executive for Continental Europe.

Munich Re's "Global Cyber Risk and Insurance Survey 2026" found that 89 percent of companies feel inadequately protected against cyber threats. The company continues investing in cyber risk modeling, data, and prevention capabilities, including through its acquisition of At-Bay.

Climate-related exposures remain another significant concern. Munich Re reported that nonpeak perils, including smaller-scale weather events, accounted for approximately 70 percent of Europe's insured natural catastrophe losses over the past 20 years.

France experienced summer temperatures 3.6 degrees above average in 2026, while Europe's cumulative burned area exceeded 10,000 square kilometers in 2025.

"Understanding and modeling evolving climate-related risks remains crucial," said Tobias Grimm, chief climatologist at Munich Re.

Munich Re said rising temperatures are increasing risks to agriculture, energy production, and transportation infrastructure, while atmospheric warming can intensify heavy rainfall and flooding. Changes in severe thunderstorm conditions can also influence hail losses, reinforcing the need for improved risk modeling, appropriate insurance pricing, and investments in prevention and adaptation.