Allianz Announces Excellent Performance and Is Fully on Track for Full-year Ambitions
Allianz achieves strong growth and record operating profit
Total business volume rises 8.0 1 percent to 44.5 billion euros, supported by good growth across all segments
Operating profit increases 12.2 percent and reaches a record level of 4.4 billion euros, with particular strong contribution from the Property-Casualty segment
Shareholders' core net income advances by 17.3 percent and reaches 3.0 billion euros. Adjusted for the 0.3 billion euros disposal gain on the UniCredit Joint Venture, shareholders' core net income increases 7.1 percent
6M 2025
Excellent performance across our businesses and record operating profit
Total business volume grows 10.1 1 percent and reaches 98.5 billion euros, with contributions from all segments
Operating profit increases 9.3 percent to 8.6 billion euros, our highest half-yearly operating profit ever, reaching 54 percent of our full-year outlook midpoint
Shareholders' core net income advances 9.5 percent to 5.5 billion euros
Core earnings per share grow 11.3 percent and reach 13.99 euros
Annualized core RoE is excellent at 18.5 percent
Adjusted for the one-off tax provision related to the forthcoming sale of our stake in our Indian Joint Ventures in 1Q and the disposal gain on the UniCredit Joint Venture in 2Q, shareholders' core net income increases strongly by 6.2 percent, core earnings per share rise 7.9 percent and our annualized core RoE is at a very strong level of 17.9 percent
Solvency II capitalization ratio remains strong at 209 percent 2 with excellent capital generation
Outlook & other
Allianz is fully on track to achieve its full-year operating profit outlook of 16.0 billion euros, plus or minus 1 billion euros 3
Share buy-back program of up to 2 billion euros announced on February 27 underway; 1.0 billion euros completed in the first six months of 2025
'Allianz has delivered record results in the first half of the year, underpinned by sustained growth and a disciplined focus on productivity. The value and relevance of our products help us to retain and expand our customer base.
Our diversified mix of businesses, global reach, and consistent execution bring opportunity and momentum, placing us on track to deliver on the ambitions set out at our Capital Markets Day in December.'
- Oliver Bäte, Chief Executive Officer of Allianz SE
FINANCIAL HIGHLIGHTS
Allianz Group: Excellent performance and record operating profit
'The strength of our business model and Allianz's capacity for consistent delivery are evident in our record operating profit of 8.6 billion euros for the first six months of the year.
We generated healthy and profitable growth across all segments and continued to produce sustainable value for all stakeholders.
Our performance sets a strong foundation for the remainder of the year and we confidently affirm our full-year operating profit outlook of 16 billion euros plus or minus 1 billion euros.'
- Claire-Marie Coste-Lepoutre, Chief Financial Officer of Allianz SE
In 2Q 2025, Allianz has delivered an excellent performance, characterized by strong growth and a record operating profit.
Our total business volume reached 44.5 (2Q 2024: 42.6) billion euros, an internal growth of 8.0 percent. All segments contributed to this attractive growth.
Operating profit rose 12.2 percent and reached a record level of 4.4 (3.9) billion euros, 28 percent of our full-year outlook midpoint.
Shareholders' core net income advanced 17.3 percent to 3.0 (2.5) billion euros. This growth was driven by a higher operating profit and an improved non-operating result. Adjusted for the 0.3 billion euros disposal gain on the UniCredit Joint Venture, shareholders' core net income increased 7.1 percent.
Allianz's 6M 2025 results were excellent, delivering a record operating profit underpinned by double-digit internal growth.
Our total business volume expanded to 98.5 (6M 2024: 91.0) billion euros, an internal growth of 10.1 percent, with particular strong growth in our Life/Health segment.
Operating profit was excellent at 8.6 (7.9) billion euros, a strong increase of 9.3 percent. The Property-Casualty business was the main growth driver but all business segments contributed.
Shareholders' core net income advanced by 9.5 percent to a strong level of 5.5 (5.0) billion euros. Adjusted for a one-off tax provision related to the forthcoming sale of our stake in our Indian Joint Ventures in 1Q and the disposal gain on the UniCredit Joint Venture in 2Q, shareholders' core net income was up by 6.2 percent.
Core earnings per share (EPS) 6 amounted to 13.99 (12.57) euros, an increase of 11.3 percent. Adjusted for the above-mentioned one-off tax provision and disposal gain, core earnings per share rose 7.9 percent.
Allianz has delivered an excellent annualized core return on equity (RoE) 6 of 18.5 percent in 6M 2025 (full-year 2024: 16.9 percent). Adjusted for the effects of the one-off tax provision and disposal gain, the annualized core return on equity (RoE) was 17.9 percent.
This performance was achieved while we maintained a strong capitalization with a Solvency II ratio of 209 percent (1Q 2025: 208 percent), supported by excellent capital generation.
Outlook
Allianz is fully on track to achieve its full-year outlook of an operating profit of 16.0 billion euros, plus or minus 1 billion euros.
Other
The share buy-back program of up to 2 billion euros, announced on February 27, is underway and 1.0 billion euros were completed in the first six months of 2025.
Property-Casualty insurance: Very good growth and excellent underwriting profitability
Key performance indicator
2Q 2025
Change vs
prior year
6M 2025
Change vs
prior year
Total business volume (€ bn) 7
20.1
8.7%
47.1
7.9%
Operating profit (€ mn)
2,295
19.9%
4,465
12.1%
Combined ratio (%)
91.2
-2.2%-p
91.5
-1.2%-p
Loss ratio (%)
67.4
-1.9%-p
67.5
-0.8%-p
Expense ratio (%)
23.9
-0.4%-p
24.0
-0.4%-p
Expand
Core messages Property-Casualty insurance 2Q 2025
Very good internal growth of 8.7 percent
Record operating profit, reaching 29 percent of our full-year outlook midpoint
Excellent combined ratios in commercial and retail of 90.3 percent and 91.8 percent
In 2Q 2025, total business volume reached 20.1 (2Q 2024: 19.3) billion euros. Internal growth was very good at 8.7 percent, with healthy growth in both commercial 8 and retail 9. Allianz successfully managed growing its business while maintaining underwriting discipline.
The operating profit grew to a record level of 2.3 (1.9) billion euros, an increase of 20 percent compared to the second quarter 2024. Growth was entirely driven by a higher insurance service result.
The combined ratio improved to an excellent level of 91.2 percent (93.5 percent). The loss ratio reached 67.4 percent (69.2 percent), a strong improvement of 1.9 percentage points. This performance was supported by benign natural catastrophes as well as underlying improvements, partly offset by a lower run-off result. The expense ratio developed favorably by 0.4 percentage points to 23.9 percent.
Retail showed a strong performance. It delivered very good internal growth of 7 percent while further improving its combined ratio to 91.8 percent (94.7 percent).
The commercial business achieved a strong internal growth of 10 percent, also benefitting from high growth in Allianz Partners' health business. The segment achieved an outstanding combined ratio of 90.3 percent (91.3 percent).
Core messages Property-Casualty insurance 6M 2025
Very good internal growth of 7.9 percent
Record operating profit, reaching 56 percent of full-year outlook midpoint
Excellent combined ratios in commercial and retail, supported by underwriting actions
In the 6M 2025 period, total business volume reached 47.1 (6M 2024: 44.8) billion euros, delivering a very good internal growth of 7.9 percent.
Operating profit was excellent at 4.5 (4.0) billion euros, reaching 56 percent of our full-year outlook midpoint. Strong growth of 12 percent was entirely driven by a higher insurance service result, more than offsetting a lower operating investment result.
The combined ratio was at a strong level of 91.5 percent (92.7 percent), with improvements in the loss ratio and the expense ratio. The loss ratio reached 67.5 percent (68.3 percent). Underlying improvements driven by underwriting actions and slightly lower natural catastrophe losses overcompensated a lower run-off ratio. The expense ratio improved by 0.4 percentage points to 24.0 percent.
The performance of our retail and commercial businesses was strong.
In our retail business, internal growth reached 8 percent, while the combined ratio improved 2.0 percentage points to 91.8 percent, driven by our SME and non-motor businesses.
Internal growth of 7 percent in our commercial business was solid and the segment achieved an excellent combined ratio of 91.0 percent (90.6 percent).
Life/Health insurance: Strong new business growth at attractive margins
Core messages Life/Health insurance 2Q 2025
93 percent of new business premiums generated in preferred lines of business
New business margin attractive at 5.7 percent, well above our 5 percent target level
Operating profit strong at 1.4 billion euros, reaching 26 percent of our full-year outlook midpoint
In 2Q 2025, PVNBP, the present value of new business premiums, grew to 19.5 (2Q 2024: 18.8) billion euros. Growth was broad-based and 93 percent (93 percent) of our new business was generated in our preferred lines.
The new business margin (NBM) remained attractive at 5.7 percent (5.8 percent) and the value of new business (VNB) increased by 2.9 percent to 1.1 (1.1) billion euros.
Operating profit advanced to a strong level of 1.4 (1.4) billion euros, an increase of 1.8 percent, and reached 26 percent of our full-year outlook midpoint.
The Contractual Service Margin (CSM) amounted to 55.8 billion euros (1Q 2025: 57.0 billion euros 12). The development was impacted by currency effects and the sale of UniCredit Allianz Vita S.p.A.. Normalized CSM growth was good at 0.9 percent.
Core messages Life/Health insurance 6M 2025
Strong double-digit new business premium growth at attractive margins
Operating profit growth of 5 percent, spread across most regions
Normalized CSM growth of 2.8 percent on track to reach ~5 percent growth ambition for full year
In 6M 2025, PVNBP increased by 10.9 percent to 45.6 (6M 2024: 41.1) billion euros, with growth across most entities. During the first half of 2025, 92 percent (93 percent) of our new business sales were in our preferred lines.
The new business margin was at an attractive level of 5.6 percent (5.7 percent). The value of new business rose by 8.6 percent to 2.6 (2.4) billion euros.
Operating profit of 2.8 (2.7) billion euros increased by 4.6 percent, reaching 51 percent of our full-year outlook midpoint.
The Contractual Service Margin (CSM) rose to 55.8 billion euros from 55.6 billion euros 13 at the end of 2024. Normalized CSM growth of 2.8 percent was good and Allianz is on track to reach our ~5 percent growth ambition for the year.
Asset Management: Good organic third-party AuM growth
Core messages Asset Management 2Q 2025
Assets under management (AUM)-driven revenues grow by 8 percent (F/X adjusted)
Operating profit advances 5 percent to 779 million euros
Good third-party net inflows of 14 billion euros
In 2Q 2025, operating revenues increased to 2.0 (2Q 2024: 2.0) billion euros, an internal growth of 6.6 percent. This was due to higher AuM-driven revenues, which increased by 8.0 percent (F/X adjusted).
Operating profit rose to a good level of 779 (742) million euros, up 4.9 percent. Adjusted for foreign currency translation effects, operating profit increased by 9.1 percent. The cost-income ratio (CIR) improved to 61.3 percent (62.4 percent), reflecting good top-line development and tight cost management.
Third-party assets under management amounted to 1.842 trillion euros as of June 30, 2025 (2Q 2024: 1.803; 1Q 2025: 1.914). Compared to the first quarter 2025, positive market effects of 18 billion euros and net inflows of 14 billion euros were more than offset by foreign currency translation effects of 103 billion euros. Average third-party assets under management amounted to 1.855 trillion euros, 4 percent above 2Q 2024.
Core messages Asset Management 6M 2025
Very good third party net inflows of 42 billion euros
Operating profit increases 5 percent to 1.6 billion euros, on track for full-year outlook
Cost-income ratio improves to 61.3 percent
In 6M 2025, operating revenues increased to 4.1 (6M 2024: 4.0) billion euros, an internal growth of 3.8 percent. The increase was driven by higher AuM-driven revenues following higher average third-party AuM.
Operating profit rose to 1.6 (1.5) billion euros, up 4.8 percent. Adjusted for foreign currency translation effects, operating profit increased by 5.7 percent. The cost-income ratio (CIR) improved to 61.3 percent (61.8 percent).
Third-party assets under management amounted to 1.842 trillion euros as of June 30, 2025, compared to 1.920 trillion euros as of December 31, 2024. Very good net inflows of 42 billion euros and positive market effects were more than offset by foreign currency translation effects of 160 billion euros. Average third-party assets under management amounted to 1.896 trillion euros, 7 percent above 6M 2024.
FOOTNOTES
1 Internal growth; total growth 4.3 percent in 2Q 2025 and 8.2 percent in 6M 2025.
2 Based on quarterly dividend accrual; additional accrual to reflect FY dividend would impact Solvency II capitalization ratio by -7%-p as of June 30, 2025. This applies to all information regarding the Solvency II capitalization ratio in this document.
3 As always, natural catastrophes and adverse developments in the capital markets, as well as factors stated in our cautionary note regarding forward-looking statements may severely affect the operating profit and/or net income of our operations and the results of the Allianz Group.
4 Change refers to internal growth.
5 Change versus full year 2024.
6 Core EPS and core RoE calculation based on shareholders' core net income.
7 Change refers to internal growth.
8 Commercial including large Corporate, MidCorp, credit insurance, internal and 3rd party R/I. This applies to all information related to commercial performance in this document.
9 Retail including SME and Fleet. This applies to all information related to retail performance in this document.
10 Normalized CSM growth compared to March 31, 2025.
11 Normalized CSM growth compared to December 31, 2024. Percentage calculated including UniCredit Allianz Vita S.p.A. until the sale and the scope changes in the base value effective January 1, 2025.
12 Includes gross CSM of EUR 0.8 bn and net CSM of EUR 0.2 bn as of March 31, 2025, for UniCredit Allianz Vita S.p.A., which was classified as held for sale in the third quarter of 2024 and was sold in the second quarter of 2025.
13 Figure includes gross CSM of EUR 0.8 bn as of December 31, 2024 for UniCredit Allianz Vita S.p.A., which was classified as held for sale in the third quarter of 2024. Effective January 1, 2025, the German APR and the Austrian Health businesses have been transferred from Property-Casualty to the Life/Health business segment resulting in a EUR 1.2 bn shift in the gross CSM opening balance.
14 Internal growth.
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2Q & 6M 2025 RESULTS TABLE
Allianz Group - key figures 2nd quarter and first half year 2025
2Q 2025
2Q 2024
Delta
6M 2025
6M 2024
Delta
Total business volume
€ bn
44.5
42.6
4.3%
98.5
91.0
8.2%
- Property-Casualty
€ bn
20.1
19.3
4.4%
47.1
44.8
5.3%
- Life/Health
€ bn
22.5
21.5
4.6%
47.6
42.7
11.5%
- Asset Management
€ bn
2.0
2.0
1.8%
4.1
4.0
3.5%
- Consolidation
€ bn
-0.2
-0.2
32.6%
-0.3
-0.3
-2.8%
Operating profit / loss
€ mn
4,406
3,926
12.2%
8,644
7,911
9.3%
- Property-Casualty
€ mn
2,295
1,915
19.9%
4,465
3,981
12.1%
- Life/Health
€ mn
1,403
1,379
1.8%
2,830
2,705
4.6%
- Asset Management
€ mn
779
742
4.9%
1,589
1,516
4.8%
- Corporate and Other
€ mn
-74
-112
-34.2%
-239
-291
-17.9%
- Consolidation
€ mn
3
2
43.3%
-1
0
n.m.
Net income
€ mn
3,018
2,661
13.4%
5,599
5,293
5.8%
- attributable to non-controlling interests
€ mn
177
149
19.0%
335
305
10.0%
- attributable to shareholders
€ mn
2,841
2,513
13.1%
5,264
4,988
5.5%
Shareholders' core net income 1
€ mn
2,976
2,536
17.3%
5,527
5,049
9.5%
Core earnings per share 2
€
7.39
6.15
20.2%
13.99
12.57
11.3%
Additional KPIs
- Group
Core return on equity 3
%
–
–
–
18.5%
16.9%
1.6%
-p
- Property-Casualty
Combined ratio
%
91.2%
93.5%
-2.2%
-p
91.5%
92.7%
-1.2%
-p
- Life/Health
New business margin
%
5.7%
5.8%
-0.1%
-p
5.6%
5.7%
-0.1%
-p
- Asset Management
Cost-income ratio
%
61.3%
62.4%
-1.1%
-p
61.3%
61.8%
-0.5%
-p
06/30/2025
12/31/2024
Delta
Shareholders' equity 4
€ bn
57.2
60.3
-5.1%
Contractual service margin (net) 5
€ bn
34.2
34.5
-1.0%
Solvency II capitalization ratio 6
%
209%
209%
1%
-p
Third-party assets under management
€ bn
1,842
1,920
-4.1%
Please note: The figures are presented in millions of Euros, unless otherwise stated. Due to rounding, numbers presented may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.
1_
Presents the portion of shareholders' net income before non-operating market movements and before amortization of intangible assets from business combinations (including any related income tax effects).
2_
Calculated by dividing the respective period's shareholders' core net income, adjusted for net financial charges related to undated subordinated bonds classified as shareholders' equity, by the weighted average number of shares outstanding (basic core EPS).
3_
Represents the annualized ratio of shareholders' core net income to the average shareholders' equity at the beginning and at the end of the period. Shareholders' core net income is adjusted for net financial charges related to undated subordinated bonds classified as shareholders' equity. From the average shareholders' equity, undated subordinated bonds classified as shareholders' equity, unrealized gains and losses from insurance contracts and other unrealized gains and losses are excluded. Annualized figures are not a forecast for full year numbers. For 6M 2024, the core return on equity for the respective full year is shown.
4_
Excluding non-controlling interests.
5_
Includes net CSM of EUR 0.3bn as of 31 December 2024 for UniCredit Allianz Vita S.p.A., which was classified as held for sale in 3Q 2024. Sale has been completed in 2Q 2025.
6_
Risk capital figures are group diversified at 99.5% confidence level. Solvency II capitalization ratio is based on quarterly dividend accrual; additional accrual to reflect FY dividend would impact solvency II capitalization ratio by -7%-p as of 30 June 2025.
Expand
RATING
1 Includes ratings for securities issued by Allianz Finance II B.V. and Allianz Finance Corporation.
2 A.M. Best's Rating Reports reproduced on www.allianz.com appear under licence from A.M. Best Company and do not constitute, either expressly or implicitly, an endorsement of Allianz's products or services. A.M. Best's Rating Reports are the copyright of A.M. Best Company and may not be reproduced or distributed without the express written consent of A.M. Best Company. Visitors to www.allianz.com are authorised to print a single copy of the rating report displayed there for their own use. Any other printing, copying or distribution is strictly prohibited. A.M. Best's ratings are under continual review and subject to change or affirmation. To confirm the current rating visit www.ambest.com.
3 Issuer credit rating.
4 Final ratings vary on the basis of the terms.
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About Allianz
The Allianz Group is one of the world's leading insurers and asset managers serving private and corporate customers in nearly 70 countries. Allianz customers benefit from a broad range of personal and corporate insurance services, ranging from property, life and health insurance to assistance services to credit insurance and global business insurance. Allianz is one of the world's largest investors, managing around 749 billion euros* on behalf of its insurance customers. Furthermore, our asset managers PIMCO and Allianz Global Investors manage about 1.8 trillion euros* of third-party assets. Thanks to our systematic integration of ecological and social criteria in our business processes and investment decisions, we are among the leaders in the insurance industry in the Dow Jones Sustainability Index. In 2024, over 156,000 employees achieved total business volume of 179.8 billion euros and an operating profit of 16.0 billion euros for the Group.
* As of June 30, 2025.
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These assessments are, as always, subject to the disclaimer provided below.
Cautionary note regarding forward-looking statements
This document includes forward-looking statements, such as prospects or expectations, that are based on management's current views and assumptions and subject to known and unknown risks and uncertainties. Actual results, performance figures, or events may differ significantly from those expressed or implied in such forward-looking statements.
Deviations may arise due to changes in factors including, but not limited to, the following: (i) the general economic and competitive situation in the Allianz's core business and core markets, (ii) the performance of financial markets (in particular market volatility, liquidity, and credit events), (iii) adverse publicity, regulatory actions or litigation with respect to the Allianz Group, other well-known companies and the financial services industry generally, (iv) the frequency and severity of insured loss events, including those resulting from natural catastrophes, and the development of loss expenses, (v) mortality and morbidity levels and trends, (vi) persistency levels, (vii) the extent of credit defaults, (viii) interest rate levels, (ix) currency exchange rates, most notably the EUR/USD exchange rate, (x) changes in laws and regulations, including tax regulations, (xi) the impact of acquisitions including and related integration issues and reorganization measures, and (xii) the general competitive conditions that, in each individual case, apply at a local, regional, national, and/or global level. Many of these changes can be exacerbated by terrorist activities.
No duty to update
Allianz assumes no obligation to update any information or forward-looking statement contained herein, save for any information we are required to disclose by law.
Other
The figures regarding the net assets, financial position and results of operations have been prepared in conformity with International Financial Reporting Standards. This Quarterly Earnings Release is not an Interim Financial Report within the meaning of International Accounting Standard (IAS) 34. This is a translation of the German Quarterly Earnings Release of the Allianz Group. In case of any divergences, the German original is binding.
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Relying on Social Security and pensions for retirement The average Social Security retirement benefit reached an all-time high of $2,002.39 in May 2025, according to Social Security Administration (SSA) data. So it makes sense that many boomers would rely on their Social Security benefit and/or pension plan for a comfortable retirement. For millennials, however, pensions are few and far between. Back in 1978, the Revenue Act of 1978 introduced 401(k)s, which eventually started to replace pensions. Today, only about 15% of private employers offer a pension. There's also uncertainty around the future of Social Security, with potential cuts to benefits if nothing changes by 2034. Millennials may be more likely to build a retirement plan based on a mix of retirement savings tools, including 401(k)s, Roth IRAs and brokerage accounts. With uncertainty around Medicare and Medicaid, they may also want to consider health savings accounts and long-term care insurance. Stay in the know. Join 200,000+ readers and get the best of Moneywise sent straight to your inbox every week for free. 4. Staying at the same job until you retire Older generations may view job-hopping by younger generations as a lack of commitment. In their time, loyalty to one company often meant job security and career advancement — and perhaps an early retirement with a decent pension. But for younger generations, the job market is being continually disrupted — particularly by technology. Millennials are the generation most likely to switch jobs, according to a Gallup report, and six in 10 are open to new job opportunities. And this strategy is paying off for millennials. Data from ADP found that Americans who switch jobs see pay gains nearly double of those who don't. 5. Spending hundreds annually on cable Americans spend a monthly average of $122 on cable and internet. Boomers are more likely to spend money on cable TV, even if they don't watch all of the channels they pay for. That's not to say they aren't embracing digital media (they are) — but they haven't cut the cord on cable, either. Millennials are the cord-cutting generation. Not only can they watch what they want, when they want — without ads — streaming services are much cheaper than cable packages. However, with a plethora of streaming services available, some may end up paying as much as a typical cable package. While the average American has 4.5 subscriptions to streaming services, millennials are the 'subscription champs,' according to a Bango report. Millennials typically have between six to 11 subscriptions and they're the most likely to spend more than $100 per month on those subscriptions. 6. Refusing to discuss finances Financial topics were once considered taboo — you just didn't talk about money at the dinner table (or any other time). Indeed, more than half (56%) of Americans say their parents never discussed money with them, according to a Fidelity survey. But that's changing. Younger generations are more open to discussing everything from how much money they're making to their investment strategies. Thanks to social media and TikTok money talks, financial discussions are less taboo — even if millennials may still struggle to talk about money with their parents. 7. Seeking advice from professionals Boomers are more likely to seek professional advice on financial matters, with 39% of boomers saying they would turn to a professional first if they had questions about their finances, according to the 2024 Policygenius Financial Planning Survey. Younger generations often turn to other sources for financial advice, from online resources and robo-advisors to social media influencers. But this is one area where millennials may be starting to follow in their parents' footsteps. Some millennials are now turning to traditional advisors for more complex financial decisions, such as investments and retirement planning. About a quarter (26%) of millennials say they've received advice from a financial advisor for the first time within the last year, according to findings from Northwestern Mutual's 2025 Planning & Progress Study. While boomers and millennials may not agree on everything — especially when it comes to money matters — it seems they do agree on having a plan for financial wellbeing. What to read next Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan 'works every single time' to kill debt, get rich in America — and that 'anyone' can do it Here are 5 simple ways to grow rich with real estate if you don't want to play landlord. And you can even start with as little as $10 Rich, young Americans are ditching the stormy stock market — here are the alternative assets they're banking on instead Here are 5 'must have' items that Americans (almost) always overpay for — and very quickly regret. How many are hurting you? This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
CNBC
2 days ago
- CNBC
Why insurers worry the world could soon become uninsurable
Top insurers fear the climate crisis could soon outpace industry solutions, effectively threatening to make entire regions around the world uninsurable. Günther Thallinger, a board member at Allianz, one of the world's biggest insurers, recently outlined how the world is fast approaching temperature levels where insurers will no longer be able to offer cover for financial services, such as mortgages and investments. In a LinkedIn post published in late March, Thallinger made the case for rapid decarbonization, pointing out that entire asset classes were "degrading in real time" as extreme weather events take their toll. Perhaps most strikingly of all, he warned the worsening climate crisis appears to be on track to destroy capitalism. Insurance, which is regarded as the invisible lubricant of the global economy, has a unique role to play in addressing climate-related risks. As professional risk managers, insurers routinely allow investors to take on calculated risks, protecting individuals and businesses against financial losses. Thallinger, who is responsible for investment management and sustainability at Allianz, told CNBC that approximately two-thirds of economic losses from natural catastrophes are currently uninsured, indicating a "major societal problem." The so-called protection gap means that the financial burden of these disasters often falls on individuals, businesses and governments, rather than insurance firms. "If this volume just grows even more, we simply have a societal situation that is not bearable anymore because it is just too much risk that is no longer covered," Thallinger told CNBC by video call. "The logic is not ours or mine. No, absolutely not. There are many people who are actually talking about how you cannot insure certain assets. It's very, very difficult to deal with these assets as an investor." The warning comes at a time when the world is on course for a temperature increase of as much as 2.6-3.1 degrees Celsius this century, according to the United Nations, a level that would trigger "catastrophic" consequences for the planet. Scientists have repeatedly warned that global average temperatures must be kept below 1.5 degrees Celsius to avoid the worst of what the climate crisis has in store. This threshold is recognized as a crucial long-term target because so-called tipping points become more likely beyond this level. Tipping points can lead to dramatic shifts or potentially irreversible changes to some of Earth's largest systems. "We can really talk about adaptation. How to build our infrastructure, our houses, our streets, our pipelines, our grids in such a way that they can withstand certain forms of weather phenomena. This is something that we can do with a very, very easy economic case behind it," Thallinger said. Allianz estimates that the cost of economic losses from natural catastrophes is typically around 10 times higher than the cost of adaptation, noting that this provides a clear economic incentive for policymakers to invest in preventative measures. "If we continue, however, with the policies that we have out there, we are clearly on a pathway now of 2.7 degrees or 3 degrees where adaptation is simply not doable anymore. This is just what it is. We cannot protect Amsterdam from sea level rise of three meters. This is just not doable," Thallinger said. It's not just Allianz's Thallinger fearing the worst. Zurich Insurance Group, Europe's fifth-largest insurer, said in April alongside a research paper assessing climate resilience that the outlook looks "alarmingly bleak." The Swiss insurer cited the Los Angeles wildfires at the start of the year as a stark reminder that even the world's wealthiest economies are unprepared for the impact of increasing climate risks. Zurich also found that global insured losses have grown at a much faster rate than the global economy over the past three decades. On an inflation-adjusted basis, Zurich said that average insured losses rose by 5.9% per year between 1994 and 2023, while global gross domestic product (GDP) increased by 2.7% annually over the same period. The findings suggest that insured losses have more than doubled relative to global growth over the past 30 years. "If insured losses continue to grow at this rate, premiums for climate risk coverage will need to increase to reflect the additional risk," Zurich Insurance Group said in the paper. "This in turn, will affect the level of protection that individuals and businesses are willing and able to purchase, with potential consequences for the overall functioning of the market." For insurers and reinsurers, the increase in severity and frequency of extreme weather events has coincided with astronomical growth in the catastrophe bond market. First created in the 1990s, so-called CAT bonds refer to a type of financial instrument designed to raise money for insurers in the event of a natural disaster, such as a hurricane or earthquake. Swiss Re, a leading global reinsurer, said in a recent report that the CAT bond market has expanded by a whopping 75% since the end of 2020, noting that the trend that shows little sign of slowing down. For Allianz's Thallinger, however, the climate crisis threatens to push a long-standing relationship between more risk and more business for insurers to breaking point. At some stage, this could have implications for financial markets, he said. Steve Evans, owner and editor-in-chief at specialist data provider warned the insurance industry won't just keep bearing the brunt of economic losses from natural disasters. "Unless resilience is increased and protection is put in place, then the more disasters impact regions and the more expensive their insurance is going to get. And that could be a terrible spiral to be honest with you," Evans told CNBC by video call. "If the losses keep escalating, it just becomes uneconomic for insurers and reinsurers and even the capital markets. So, something has to be done to really bring together both resilience and protection." Not everyone is convinced the insurance industry will struggle to function amid rising global average temperatures. "Will the world become uninsurable? Well, I'm a bit hesitant on that," said Tobias Grimm, chief climate scientist at German reinsurance giant Munich Re. "It's all about the question of price. We have appetite still to offer — not cut — insurance given that there are healthy market conditions, and we get risk adequate premium on that." Grimm told CNBC that since Munich Re's business offers reinsurance on a one-year basis, rather than a multi-year basis, the question of insurability is not typically something that comes up. "The underlying problem is that we still develop properties in high-risk areas, and we have seen with the example of Californian wildfires where many of these rich villas in the outskirts of the Los Angeles suburbs were hit first," Grimm said. "So, that's the issue. We can counter them by encouraging loss prevention and thinking about land use management schemes, these kinds of things," he added.
