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- Global Reinsurance Market 2025: Record Capital, Sustained Profitability, and Evolving Efficiency Amid Market Normalization
Global Reinsurance Market 2025: Record Capital, Sustained Profitability, and Evolving Efficiency Amid Market Normalization
Reinsurance is the insurance of insurance companies, a vital mechanism that allows primary insurers to transfer portions of their risk portfolios to other parties in exchange for a premium.
Introduction
This process spreads large or catastrophic exposures across a wider pool of capital, stabilizing financial performance and protecting insurers from insolvency following extreme loss events. In essence, reinsurance acts as the shock absorber of the global insurance system, ensuring that claims can be paid even when natural disasters, large-scale cyber incidents, or other systemic shocks occur.
The importance of reinsurance has only grown in recent years. As climate change intensifies weather-related losses, asset values rise, and new forms of risk, such as cyber, political, and supply-chain disruptions, emerge, primary insurers increasingly rely on reinsurance to maintain solvency, manage volatility, and comply with capital requirements. Reinsurers, in turn, use sophisticated models and diversified global portfolios to absorb these risks efficiently, making them indispensable to both the insurance and capital markets ecosystems.
The global reinsurance market was valued at USD 711.75 billion in 2024 and is projected to expand to nearly USD 2 trillion by 2034, representing a compound annual growth rate (CAGR) of 10.88% from 2025 onward. This remarkable growth reflects both cyclical recovery and structural shifts in demand. The market is expected to climb from USD 789.33 billion in 2025 to USD 2,000.08 billion in 2034, signaling a decade of sustained expansion.
Several forces are driving this trajectory. Rising catastrophe losses have reinforced the need for more robust risk transfer mechanisms, while emerging economies are broadening insurance penetration and increasing the demand for reinsurance capacity. Additionally, the rise of alternative capital, through insurance-linked securities (ILS), catastrophe bonds, and private reinsurance vehicles, has deepened global capacity and attracted institutional investors seeking diversification.
Ultimately, reinsurance plays a critical role in preserving economic resilience. By enabling insurers to underwrite more risk with confidence, it supports economic growth, investment, and recovery in the face of shocks. As the market heads toward the USD 2 trillion mark, the sector’s ability to balance capital inflows, underwriting discipline, and risk innovation will define its long-term stability and sustainability.
Capital Expansion and Market Resilience in 2025
The strength of the reinsurance industry ultimately depends on its capital base, the pool of funds available to absorb global shocks and underwrite future risks. In this regard, the market entered 2025 with record capacity. According to recent industry data, total dedicated reinsurance capital reached USD 805 billion in the first half of 2025, marking a 4.8% increase from year-end 2024. This represents the highest level of reinsurance capital ever recorded, underscoring both investor confidence and the sector’s ability to attract capital despite a volatile macroeconomic environment.
Breaking down this total, traditional indexed reinsurer capital accounts for roughly USD 660 billion, while alternative capital, including insurance-linked securities (ILS), catastrophe bonds, and collateralized reinsurance, has grown to USD 118 billion. The contribution from regional and local reinsurers remains steady at around USD 27 billion, reflecting the continued importance of domestic players in providing niche capacity.
This steady inflow of capital is a crucial stabilizer for the insurance ecosystem. As climate-related catastrophes, inflationary claims costs, and geopolitical uncertainties have increased loss frequency and severity, the ability of reinsurers to replenish and grow capital demonstrates strong financial resilience. The rise in alternative capital is particularly notable, as institutional investors, such as pension funds and asset managers, continue to view reinsurance-linked assets as attractive sources of uncorrelated returns.
From a market-cycle perspective, the ample capital entering 2025 has fostered buyer-friendly conditions. With competition intensifying among reinsurers to deploy capital efficiently, pricing has softened in select property and specialty lines, allowing cedants to secure broader coverage or higher limits. However, this influx also raises questions about underwriting discipline and return on equity, especially if catastrophe losses remain elevated in the second half of the year.
Overall, the record USD 805 billion in dedicated capital signals a market that is both well-capitalized and increasingly diversified in its sources of funding. This deep reservoir of financial strength ensures that the reinsurance sector remains a cornerstone of global economic stability, capable of absorbing systemic shocks while continuing to expand its role in transferring and financing risk across the world.
Reinsurance Capital Strengthens on Earnings Retention
Global reinsurance capital reached $660 billion in the first half of 2025, up from $629 billion at year-end 2024, according to the latest index data. The increase was largely driven by retained earnings, which contributed $28 billion to total capital, offset partially by $13 billion in buybacks and dividends. Additional support came from a $4 billion capital raise, $4 billion in unrealized investment gains, and $8 billion from FX and other movements.
Reinsurance capital represents the financial capacity available to absorb losses, ensuring that the industry can underwrite major risks and maintain stability after catastrophic events. The continued buildup of capital signals resilient profitability and cautious capital management across leading reinsurers, even as natural catastrophe losses and pricing volatility remain key market challenges.
Capital Increases Across Leading Reinsurers
The first half of 2025 saw capital growth across nearly all major reinsurance companies, reflecting the sector’s strong earnings retention and investment performance. According to the INDEX data, most reinsurers reported positive capital movements, with only a few showing marginal declines due to capital returns or currency effects.
The chart below highlights that Mapfre led the index with a 14% increase in capital, followed by Hiscox (+12%), Arch Capital (+11%), and Swiss Re (+11%). This upward momentum was largely driven by solid underwriting profitability, investment gains, and favorable market conditions in early 2025.
For euro-based reinsurers, including Munich Re, SCOR, and Hannover Re, the weaker US dollar boosted capital on a reported USD basis, even though local currency movements were negative (ranging from –6% to –8%). In contrast, Hannover Re’s and SCOR’s capital decreases in local terms were primarily due to dividend-related capital returns.
At Hiscox, the 12% capital increase was supported by strong underwriting and an increase in subordinated debt, while National Indemnity’s 4% gain reflected USD 7.1 billion in net income and USD 0.9 billion in unrealized investment appreciation. Only Aspen (–1%) and Conduit Re (–4%) reported declines, mainly from capital return and foreign exchange headwinds.
These results demonstrate that, despite macroeconomic uncertainty and elevated catastrophe activity, capital formation remains broad-based. Reinsurers are showing the ability to rebuild equity through retained earnings, optimize balance sheets, and maintain investor confidence, all of which reinforce the sector’s financial resilience heading into 2025 H2.
Traditional Capital: Steady Growth Amid Catastrophe Losses
While the reinsurance sector’s capital position strengthened in early 2025, underwriting performance was tested by an unusually active catastrophe season. Insured losses from natural disasters reached $60 billion in Q1 2025, making it the second most expensive first quarter on record, largely driven by the California wildfires. Roughly one-third of those losses were reinsured, highlighting the sector’s vital role in absorbing systemic shocks.
Despite these headwinds, reinsurers showed resilience. According to Aon, the sector’s average combined ratio stood at 98.7% in Q1 2025, slightly higher than in 2024 but still within a profitable range. The largest and most diversified reinsurers absorbed about 30% of their annual catastrophe allowance in the quarter, while smaller firms faced more significant pressure.
Although premium growth has slowed as Property and Specialty pricing moves past its peak, the outlook remains broadly positive. Favorable prior-year reserve releases and strong attritional loss experience continue to support underwriting margins, even as market participants navigate pricing normalization and climate-driven volatility.
Reinsurance Sector Profitability and Return on Equity
The reinsurance sector maintained strong profitability momentum into 2025, supported by robust underwriting results and healthy investment income. As shown in Exhibit 4, the industry’s return on equity (ROE) reached 11.4% in Q1 2025 (annualized), marking the third consecutive year of double-digit returns. This follows 15.0% in 2024 and a record 17.6% in 2023, underscoring the sector’s sustained recovery from the weaker performance observed in 2017–2020.
The improvement reflects a combination of pricing discipline, favorable investment markets, and capital strength built over previous cycles. Even as catastrophe losses remained elevated, reinsurers benefited from higher interest rates and improved asset yields, which boosted investment income and offset volatility in underwriting results.
Earnings remained broadly positive across the sector, with approximately two-thirds of reinsurers generating double-digit ROEs in the first quarter of 2025, while only one reported an overall loss. Equity positions also showed modest increases in original reporting currencies, indicating both stable asset valuations and prudent capital management.
The data highlights a resilient earnings base, signaling that reinsurers are effectively converting capital and underwriting performance into shareholder returns. Importantly, this profitability has been achieved while maintaining conservative reserve practices and disciplined capital allocation, supporting long-term sector sustainability.
This profitability strength, combined with stable expense ratios, demonstrates that reinsurers are maintaining efficiency and earnings resilience even as accounting frameworks evolve under IFRS 17.
Expense Ratio Trends and IFRS 17 Impact
The subset’s expense ratio has trended downward over the past decade, reflecting gradual improvements in operational efficiency and cost discipline. From 33.1% in FY 2015 to 28.7% in FY 2022, non-IFRS expense ratios declined steadily as reinsurers streamlined processes, leveraged technology, and optimized capital allocation. However, the slowdown in revenue growth observed in 2023–2025 temporarily reversed this trend, leading to a modest uptick in the average expense ratio to around 28.0% in FY 2024 and 28.1% in the first half of 2025.
The introduction of IFRS 17 accounting standards provides a more transparent view of expense structures. Under IFRS 17, which separates insurance service results from financial results, the recalculated expense ratios appear significantly lower, around 14–13% in 2022–2025, due to changes in revenue recognition and contractual service margin treatment. This accounting transition does not imply a fundamental reduction in costs but rather a shift in reported metrics under the new standard.
Overall, the data underscores two concurrent dynamics:
Operational efficiency gains achieved over the long term through scale, digitalization, and disciplined expense management.
Accounting-driven variation arising from the adoption of IFRS 17, which redefines how expenses relate to earned revenue.
Despite modest pressure from slower premium growth, reinsurers’ underlying cost structures remain lean and stable, supporting profitability and capital resilience even amid macroeconomic headwinds.
Conclusion
The global reinsurance industry enters the second half of 2025 from a position of exceptional financial strength. Record capital levels exceeding USD 800 billion, combined with three consecutive years of double-digit returns on equity, underscore the sector’s resilience and adaptability in an environment marked by heightened catastrophe activity, inflationary pressures, and accounting transformation under IFRS 17.
Despite slowing premium growth and the normalization of pricing in property and specialty lines, reinsurers continue to demonstrate robust earnings capacity, supported by disciplined underwriting, higher investment yields, and stable expense structures. The broad-based capital expansion, driven primarily by retained earnings and prudent balance sheet management, reflects growing investor confidence and sustained access to both traditional and alternative capital sources.
Operationally, the industry’s expense ratios remain contained, even amid softer top-line growth, highlighting efficiency gains achieved through digitalization and scale optimization. The transition to IFRS 17 introduces greater transparency into performance metrics, reinforcing market trust while reshaping reported profitability profiles.
Looking ahead, the reinsurance sector’s challenge will be to balance capital abundance with underwriting discipline, ensuring that competition and capital inflows do not erode long-term returns. With the convergence of climate risk, macroeconomic volatility, and shifting regulatory frameworks, the ability to maintain profitability and capital adequacy will remain the defining measure of success.
In sum, 2025 marks a pivotal year in which the global reinsurance market demonstrates its dual strength, financially fortified yet strategically adaptive, positioning it to remain a cornerstone of global risk transfer and economic resilience for the decade ahead.
Sources & References
Aon: “Reinsurance Market Dynamics – Mid-Year 2025”
Gallagher Re: “Reinsurance Market Report – H1 2025”
Precedence Research: “Reinsurance Market Size, Trends & Forecast to 2034”
