The global reinsurance industry records an exceptional year in 2025, achieving record profitability and capital growth, according to Gallagher Re's full-year 2025 Reinsurance Market Report. Total reinsurance dedicated capital reaches a new high of US$648 billion, an 11% increase from 2024 and the second-strongest year for capital growth in over a decade. The gain is driven by retained earnings in traditional reinsurance capital and historic inflows into non-life alternative capital. Gallagher Re's reinsurance composite, which tracks the performance of the large Bermudian and Big Four European reinsurers, reports a 19.3% return on equity (ROE) for 2025, up from 16.7% in 2024, supported by strong underlying profitability and benign natural catastrophe losses. "2025 was a landmark year for the reinsurance industry, with reinsurers achieving historic levels of profitability and capital growth," says Michael van Wegen, Head of International, Gallagher Re Global Strategic Advisory. Traditional reinsurance capital rises 10% year-on-year to US$513 billion, contributing around two-thirds of overall capital growth, while non-life alternative capital surges 18% to US$135 billion, the largest annual growth rate since the report's inception in 2014. Since the end of 2022, traditional reinsurance capital has grown approximately 50% cumulatively, well ahead of revenue growth of around 20% over the same period. Alternative capital is also increasingly expanding beyond its traditional natural catastrophe focus, with casualty lines attracting growing inflows. That gap between capital and revenue growth underlies a broadening supply and demand imbalance. Revenue growth for the composite decelerates sharply from 9.7% in 2024 to 1.2% in 2025, as conditions soften in property and specialty lines. Property catastrophe renewal rates are down by double-digit percentages year-to-date, with overall portfolio rates estimated to be down by mid-single-digit percentages. For captive insurance buyers, the combination of excess capacity and softening rates creates a more favourable environment when structuring programmes and negotiating terms in the commercial reinsurance market. "While the reinsurance industry has enjoyed several years of exceptional returns, the dynamics of supply and demand have shifted in favour of buyers, as evidenced by rate softening during the January 1 and April 1 renewals," van Wegen says. "Despite this, the industry remains resilient, with profitability expected to remain well above the cost of equity in 2026." Combined ratios hit record lows, with the composite reporting 82.5% and reinsurance groups overall at 84.3%, both the lowest in Gallagher Re's time series running back to 2014. Natural catastrophe losses come in below normalised levels at 6.7% of the combined ratio, against a normalised level of 9.5%, despite elevated first-half losses driven by the California wildfires. Global insured catastrophe losses total an estimated US$129 billion, down from US$154 billion in 2024 and 5% below the ten-year average. On an underlying basis, stripping out the benefit of benign catastrophe experience, prior-year reserve releases and investment gains, the composite's underlying ROE declines to 13.5% from 14.5% in 2024, reflecting softer pricing and excess capital building ahead of earnings and revenue growth. Looking ahead, Gallagher Re projects a reported ROE of 14% to 15% for the composite in 2026, assuming normalised natural catastrophe losses and contributions from reserve releases and realised capital gains in line with ten-year averages. This would remain comfortably above the implied cost of equity of 11.7%. Traditional reinsurance capital growth is expected to slow to around 4% in 2026 as reinsurers return a greater share of earnings to shareholders, but excess capital accumulation is likely to continue, with deployment remaining a key challenge for the sector.
