The global reinsurance industry posted an exceptional 2025, with record profitability and capital growth, according to Gallagher Re’s full-year 2025 Reinsurance Market Report.
Total reinsurance dedicated capital reached a new high of $648 bn, up 11% from 2024. It marked the second-strongest year for capital growth in more than a decade.
Retained earnings from traditional reinsurers drove much of the increase, while non-life alternative capital recorded historic inflows.
Gallagher Re’s reinsurance composite, which tracks large Bermudian reinsurers and the Big Four European groups, reported a 19.3% return on equity for 2025. That compared with 16.7% in 2024. Strong underwriting margins and lighter natural catastrophe losses supported the gain.
Michael van Wegen, head of international at Gallagher Re Global Strategic Advisory, said 2025 was a landmark year for reinsurers, with the sector reaching historic levels of profitability and capital growth.
Traditional reinsurance capital rose 10% year on year to $513 bn, supplying about two-thirds of total capital growth. Non-life alternative capital climbed 18% to $135 bn, the highest annual growth rate since Gallagher Re began the report series in 2014.
Since the end of 2022, traditional reinsurance capital has grown about 50% on a cumulative basis. Revenue rose roughly 20% over the same period. Capital has moved faster than premium growth, and pricing pressure has started to show.
Alternative capital has also moved beyond its usual natural catastrophe focus. Casualty lines are attracting more inflows, as investors look for returns outside property catastrophe risk.
The widening gap between capital and revenue points to a supply-demand imbalance. Revenue growth for the composite slowed sharply to 1.2% in 2025 from 9.7% in 2024, as property and specialty lines softened.
Property catastrophe renewal rates have fallen by double-digit percentages year to date. Gallagher Re estimates total portfolio rates are down by mid-single-digit percentages. For captive insurance buyers, the mix of surplus capacity and softer rates creates a stronger negotiating position in commercial reinsurance programmes.
Van Wegen said the reinsurance industry has produced several years of exceptional returns, but supply and demand have shifted toward buyers.
January 1 and April 1 renewals showed that shift through rate softening. He still expects profitability to remain well above the cost of equity in 2026.
Combined ratios reached record lows. The composite reported 82.5%, while reinsurance groups overall posted 84.3%. Both were the lowest figures in Gallagher Re’s data series going back to 2014.
Natural catastrophe losses came in below normalised levels at 6.7% of the combined ratio, compared with a normalised level of 9.5%. That result came despite heavier first-half losses from the California wildfires.
Global insured catastrophe losses totalled an estimated $129 bn. That was down from $154 bn in 2024 and 5% below the 10-year average.
According to Beinsure analysts, the headline figures show strong sector health, but the margin trend deserves attention.
Underlying profitability has already started to fade as pricing softens and excess capital builds faster than earnings opportunities.
On an underlying basis, after removing the benefit of lighter catastrophe losses, prior-year reserve releases, and investment gains, the composite’s ROE fell to 13.5% from 14.5% in 2024. Gallagher Re linked the decline to softer pricing and excess capital building ahead of revenue and earnings growth.
Gallagher Re projects a reported ROE of 14% to 15% for the composite in 2026. That assumes normalised natural catastrophe losses and reserve releases plus realised capital gains in line with 10-year averages. The forecast remains above the implied cost of equity of 11.7%.
Traditional reinsurance capital growth is expected to slow to about 4% in 2026 as reinsurers return more earnings to shareholders. Even so, excess capital is likely to keep accumulating. Deployment becomes the hard part.
