Strong returns in the reinsurance sector are attracting capital and leading to favorable pricing outcomes for buyers — but underwriting discipline continues, according to renewal reports from three reinsurance brokers.
Despite heavy natural catastrophe losses in the first quarter, reinsurance capacity has exceeded demand.
“[T]raditional reinsurers targeted growth and deployed more capacity at the mid-year renewals, which is accelerating the trend toward buyer-friendly conditions and leading to greater flexibility in terms and conditions as well as options to purchase expanded coverage,” said Aon in its report titled “Reinsurance Market Dynamics – Midyear 2025 Renewal.”
Read more: California Wildfires Had Little Impact on Reinsurers’ Risk Appetite During April Renewals
Reinsurers’ balance sheets continue to be strong, which is driving an appetite for growth — despite insured losses through the first half nearing $70 billion, said Guy Carpenter in its report titled “Strong returns in reinsurance sector attracts capital, leading to favorable client outcomes.”
For the first quarter alone, global insured losses from natural catastrophes were estimated at around $60 billion – the second highest Q1 loss on record – which was driven by the $40 billion California wildfire loss, Aon said. “The first half of 2025 is likely to become the second costliest on record due to additional catastrophe activity in the second quarter, including two large severe weather outbreaks in the U.S. on May 14-17 and May 18-20.”
Nevertheless, the mid-year renewals saw overall pricing continue to moderate. Aon noted there were “significant variation in renewal outcomes” as reinsurers differentiated cedents by loss experience and performance.
“Clients were largely able to secure risk-adjusted rate reductions for property treaties and were well-placed to hold pricing broadly flat in casualty lines – in part, as underlying pricing increases continue to flow through to reinsurers,” agreed Gallagher Re in its report titled 1st View: Challenging the Status Quo.
“After several highly profitable years, reinsurers are increasingly looking to deploy their significant capital, but they are disciplined in approach. In some businesses and geographies, we are still seeing reinsurers willing to sacrifice share to protect profitability — particularly larger, less growth-oriented players,” said Gallagher Re.
Increasing Client Demand
Reinsurers easily absorbed the 5% to 7% increase in client demand for property catastrophe limit, Carpenter said, noting that reinsurer capacity exceeded demand by more than 20%, driving risk-adjusted rate decreases of 5% to 15% for non-loss impacted programs, and risk-adjusted rate increases of 10% to 20% for loss-impacted programs.
“Reinsurance capacity was more than sufficient to absorb a near 10% increase in global demand for property catastrophe limit,” Aon affirmed.
Rising demand for reinsurance protection was largely driven by insurers in the U.S. and the significant depopulation of Citizens – Florida’s windstorm insurer of last resort, Aon said, explaining that the depopulation program transferred more than 428,000 Citizens policies to the private insurance market in 2024, generating additional limit demand from insurers.
“Other factors included inflation, model changes and revised views of natural catastrophe exposure, with recent wildfires in the U.S. and floods in Brazil prompting insurers to evaluate loss potential and protection needs,” Aon added.
“The number of start-up reinsurers remains small, although new players in the property catastrophe space are gaining traction and adding to competitive pressures. Competition was greatest in middle layers of catastrophe programs, in particular alternative capital created competitive tension,” Aon continued.
“The current trading environment is one of the most favorable for reinsurers in many years, evidenced by the additional capital being attracted to the sector,” said Dean Klisura, president and CEO, Guy Carpenter, in the brokers’ renewal report.
“We see this as a tremendous opportunity to re-balance the market dynamics in our clients’ favor. More capacity will continue to moderate pricing, give clients more diversification of reinsurance partners, and provide better solutions to protect earnings,” Klisura added.
Casualty Renewals
Aon said that casualty insurers entered the mid-year renewals in a relatively strong position “as robust underlying rating and underwriting actions taken in recent years helped ensure ongoing reinsurer support.”
“Reinsurers continue to support the casualty market, but remain watchful of negative trends in the market, including adverse reserve development, the frequency of nuclear verdicts and impact of litigation financing, as well as emerging areas of liability,” Aon added.
Gallagher Re pointed to the $8.1 billion of adverse prior-year development reported by U.S. property/casualty carriers in 2024, related to the trailing 10 accident years, which was up from $3.8 billion in 2023.
“Offsetting these concerns, however, are relatively high interest rates, the robust underlying rate environment and the underwriting actions taken by insurers in recent years,” Aon said.
Indeed, Gallagher Re discussed the proactive steps that many cedents are taking with their underwriting strategies and claims management practices to mitigate the impact of loss trends and improve their profits.
Such remedial actions on the part of ceding companies ultimately have benefited their renewal outcomes, Gallagher indicated in its report.
“Reinsurers showed greater confidence in those cedents who articulated the actions they have taken to improve performance, and how their actions tangibly improve future performance,” Gallagher Re said.
On the other hand, a clear market divide was demonstrated for cedents that were unable to provide reinsurers with evidence on how they were tackling performance issues, Gallagher continued. Those insurers saw less favorable outcomes.
Guy Carpenter noted that the casualty reinsurance renewals remained disciplined but there were two factors that drove more stable outcomes.
“First, reinsurers and clients evaluated trading relationships across property, casualty, and specialty programs. Reinsurers looked to find balanced support across all programs for a given client,” Guy Carpenter said. “Second, carrier underwriting actions have improved casualty economics for reinsurers, particularly proportional programs where insurers share ground-up premium and loss.”
“Reinsurers continue to be attracted to international placements with limited severity loss and good geographic diversification,” Aon added. “However, accounts with U.S. exposures that experienced further deterioration in U.S. loss severity saw a significant reduction in reinsurer appetite and increased pricing.”
Strong Reinsurer Performance
The 2025 renewals – in April and mid-year — have been greatly affected by reinsurers’ strong profits and capital positions.
“Reinsurers came into the renewal in good financial shape. They reported strong results for 2024, with ROEs well above the cost of capital,” said Gallagher Re. “Q1 results were weaker due to the impact of January’s unprecedented wildfires in Los Angeles, California, but barring further exception cat events, reinsurers remain on track for another good year overall.”
That sentiment was reiterated by Carpenter, which said that strong reinsurer performance is expected to continue this year, despite heavy natural catastrophe claims in the first quarter. “Reinsurer returns on equity were 16% in 2024 and are projected to be 15% in 2025,” Guy Carpenter added.
Aon said most major reinsurers remain on course to deliver good results in 2025. “Notably, the four composite European reinsurers have maintained their (increased) full-year earnings guidance, despite the impact of the California wildfires.”
Record Reinsurance Capital Levels
Reinsurance capital closed 2024 at an all-time high of $607 billion – a trend that Guy Carpenter expects to continue with growth of 5% to 7% by year-end 2025.
On the other hand, Aon said that global reinsurer capital reached a new high of $715 billion in 2024 and expanded by a further $5 billion to $720 billion during the first quarter of 2025, despite the California wildfire claims.
Gallagher estimates that dedicated reinsurance capital was US$769 billion at the year-end 2024 and is set to increase by another 6% this year, assuming average results for the remainder of the year.
The main driver of the growth in reinsurance capital continues to be the retained earnings of established reinsurers, said Aon and Gallagher Re.
“Strong capital positions are continuing to translate into healthy risk appetites, particularly in property and most specialty classes, and these dynamics are expected to persist into future renewals,” Aon added.
Insurance Linked Securities
Capital supply has been supported by inflows into the insurance linked securities (ILS) market, said Gallagher Re, pointing to the growth in non-life ILS assets under management (AUM) of $4 billion during the first quarter, which backed $15.2 billion in cat bond issuance through June 13, an increase of 36%, year on year.
Guy Carpenter agreed that client property catastrophe needs are also being met by a strong catastrophe bond market. “During the first half of 2025, approximately $17 billion of limit was placed through 56 property catastrophe bonds and one health catastrophe bond,” Carpenter said, adding that GC Securities has placed 23 catastrophe bonds in 2025 – the highest number of any broker year to date.
Aon noted that total capacity from insurance linked securities (ILS) has now exceeded $115 billion as of the end of Q1 2025, with growth overwhelmingly driven by the increasing size of the 144A cat bond market.
“Growth has been overwhelmingly driven by the increasing size of the 144A cat bond market; however, interest from institutional investors in sidecar opportunities continues to grow, especially for casualty risk,” Aon said.
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