German reinsurance giant Munich Re expects to record full year profit despite posting a €948m loss in the first quarter of 2011.

“Such major losses – even several within a few weeks – are possible in our reinsurance business,” said CFO Jörg Schneider. “Thanks to our solid capitalisation, we are able to absorb them.”

Munich Re’s reinsurance sector was hit particularly hard by first quarter natural catastrophe losses; reporting a €683m loss, compared with a €424m profit in 2010.

The combined operating ratio for Q1 was 159.4%, up from 109.2% in 2010. The reinsurer said 69 percentage points was due to catastrophe losses, including €1.5bn in losses from Japan alone.

Torsten Jeworrek, Munich Re's Reinsurance CEO, said: “Events like those in Japan demonstrate the role and significance of professional reinsurers in covering major losses.”

Gross premiums written in the first three months were up 16.3% on the same period last year, rising to €6.9bn (5.9bn).

Munich Re’s 1 April Japan renewals were heavily impacted by the 11 March earthquake.

The reinsurer said treaties negotiated after 11 March saw significant price increases of up to 50% for loss-affected quake cover.

Munich Re expects prices in loss-affected regions like Australia and New Zealand to “rise considerably” by year end