Aon Report: Strong Reinsurance Market Sets Stage for Strategic Growth

Favorable market dynamics are creating strategic opportunities for reinsurance buyers, according to Aon's Snapshot Guide to the Reinsurance Renewal—September 2025. The report outlines an increasingly supportive environment driven by record capital levels and evolving market structures ahead of the January 1 renewal season.

Global reinsurance capital reached approximately $735 billion as of June 30, 2025, driven by retained earnings and continued contributions from both traditional and alternative capital, per the report. Alternative capital reached a record $121 billion, with catastrophe bond volume climbing to $54 billion—an increase of nearly 20 percent from the prior year.

According to Aon, sidecars are playing a growing role in supporting proportional reinsurance structures. Casualty sidecars in particular are expanding the market's reach and enabling insurers to better manage volatility and frequency of losses.

The report also highlights increased demand for facultative reinsurance as insurers turn to it for flexibility and targeted capacity, especially in a competitive underwriting environment. Facultative reinsurance is being used as a tactical response to manage growth and support risk strategies, Aon said.

Despite insured catastrophe losses exceeding $100 billion globally in the first half of 2025, reinsurers experienced relatively benign ceded losses, according to Aon. Reinsurer capacity remains healthy, supported by strong underwriting results. The average combined ratio for 30 global reinsurers was 94.8 percent for the first half of 2025, up from 89.5 percent the prior year.

Investment returns showed a slight year-over-year decline, with average ordinary investment yield decreasing to 3.9 percent from 4.1 percent, according to the report. However, reinvestment rates continue to exceed book yields, contributing to resilient overall results.

Aon reported that reinsurers achieved an average return on equity of 14.5 percent on an annualized basis during the first half of 2025. While this is lower than the 17.6 percent in 2023 and 15 percent in 2024, it remains well above the estimated cost of equity of 8 to 10 percent.

The report identified regional disparities in insurance penetration, especially in areas with low uptake of catastrophe coverage. According to Aon, 38 percent of global catastrophe losses in the first half of 2025 were uninsured, reflecting ongoing gaps in coverage and potential areas for expansion.