European Insurance – Reinsurers: Catching a falling knife

Research evidence excerpt

European Insurance – Reinsurers: Catching a falling knife

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17 Jun 2026 00:00:00 ET │ 29 pages

European Insurance - Reinsurers

Catching a falling knife

CITI'S TAKE

James A Shuck AC

Ahead of US windstorm season we update exposures and estimate Nat Cat +44-20-7986-3975

earnings at risk from a softening cycle. With shares weak since the end of james.shuck@citi.com

April, it is clear that investors are wary of price pressure and are cautiously

positioned into hurricane season. We agree but a strong underweight is less

obvious now given recent performance. Rapid rate reductions will

accelerate how quickly we test technical margin floors and any sign of

industry discipline could be taken positively if it were to emerge. But for now

the sector is likely to struggle as it enters a volatile period. Our only Buy

remains Scor (European Focus List) which is more stock-specific.

Positioning into hurricane season — Nat Cat rates have accelerated their 15%

decline at 1/1 to 20% at 1/4 and 1/6. We expect July renewal rates to be down 20-

25%. Cat bond multiples are close to 2018 troughs. Investors are increasingly

underweight Reinsurers ahead of the windstorm season where the risk reward

appears skewed to the downside. Only a mega-cat seems capable of arresting

further rate declines. However, P/Es at Munich Re and Hannover Re now sit only

modestly above Q4 ’22 troughs and the short reinsurers trade feels crowded.

We estimate ~17-18% earnings headwinds at Swiss and Munich Re — We make

several assumptions to estimate Nat Cat earnings and premium. Based on this we

estimate that Swiss Re and Munich Re face 17-18% pressure on group earnings from

a 20% fall in Nat Cat rates. This compares with ~12% at Scor and Hannover Re.