Gallagher Re Report Highlights Strong Reinsurance Market Results

Gallagher Re's Reinsurance Market Report: Results for Full-Year 2025 found that 2025 was an exceptionally strong year for the global reinsurance industry, marked by historic profitability and capital growth. According to Gallagher Re, total reinsurance dedicated capital increased 11 percent to $648 billion, supported by retained earnings, alternative capital inflows, favorable financial markets, and foreign exchange movements.

According to the report, reinsurers included in the Gallagher Reinsurance Composite collectively reported a 19.3 percent return on equity (ROE) in 2025, benefiting from strong underwriting profitability and relatively benign natural catastrophe losses. Gallagher Re said traditional reinsurance capital has increased approximately 50 percent cumulatively since the end of 2022, significantly outpacing revenue growth of about 20 percent over the same period.

Per Gallagher Re, the strong growth in capital has shifted market dynamics in favor of buyers, contributing to softening reinsurance rates observed during January 1 and April 1 renewals. The report estimated that reinsurers could still generate a normalized 14 percent to 15 percent ROE in 2026, despite expectations for lower returns and softer pricing conditions.

According to the report, nonlife alternative capital increased 18 percent to $135 billion in 2025, representing one of the largest annual increases recorded in the history of the report. Gallagher Re said the growth was driven by favorable returns and net inflows, particularly in catastrophe bonds, while alternative capital also increasingly expanded into casualty lines beyond its traditional property catastrophe focus.

Per the report, traditional reinsurance capital increased by $45 billion during 2025, with retained earnings representing the largest contributor to growth among reinsurance-focused groups. Gallagher Re noted that capital inflows into traditional reinsurance groups remained modest, accounting for only about 1 percent of total capital.

Gallagher Re said reinsurance groups delivered their strongest ROE performance since the inception of the report in 2014, reporting an 18.3 percent ROE in 2025 compared to 14.9 percent in 2024. According to the report, the composite's 19.3 percent ROE was supported by favorable prior-year reserve development, below-normal catastrophe losses, and increased realized investment gains.

According to Gallagher Re, underlying profitability moderated in 2025 despite the strong headline results. The report stated that the composite's underlying ROE declined to 13.5 percent from 14.5 percent in 2024, reflecting a softer pricing environment, higher underlying combined ratios, and continued growth in shareholder equity that outpaced revenue and earnings growth.

Per the report, reinsurance dedicated capital growth significantly exceeded revenue growth in 2025, highlighting a growing imbalance between supply and demand in the market. Gallagher Re said capital supply increased 11 percent while revenue growth rose only about 1.5 percent, a trend the report indicated has continued into 2026.

Gallagher Re reported that combined ratios across the industry reached record low levels in 2025. According to the report, reinsurance groups posted an 84.3-percent combined ratio, while the composite improved to 82.5 percent, both representing the best underwriting performance since the start of the time series in 2014.

Per the report, catastrophe losses had a reduced impact on reinsurers' combined ratios in 2025 despite elevated losses from California and Los Angeles wildfires earlier in the year. Gallagher Re estimated that insured natural catastrophe losses globally totaled at least $129 billion in 2025, down from $154 billion in 2024 and approximately 5 percent below the 10-year average.

According to Gallagher Re, severe convective storms accounted for approximately 47 percent of insured catastrophe losses globally in 2025, while California and Los Angeles wildfires represented roughly 32 percent of losses. The report also noted that catastrophe activity outside the United States remained below average during the year.

Gallagher Re said investment performance also contributed to profitability gains in 2025. According to the report, the composite's total investment yield increased from 4.0 percent in 2024 to 4.2 percent in 2025, driven primarily by realized gains associated with lower interest rates and favorable equity market conditions.

Per Gallagher Re, reinsurers are expected to continue generating returns above the cost of equity in 2026, even as pricing softens further. The report stated that although ROEs are projected to decline from 2025 levels, profitability is still expected to remain historically strong and comfortably above estimated costs of capital.