Reinsurance Capital and Profitability Surge in Strong 2025 Results

Gallagher Re's Reinsurance Market Report: Results for Full-Year 2025 examines capital levels, profitability, and underwriting trends across the global reinsurance sector, highlighting a year of strong financial performance and continued capital growth. 

The report finds that 2025 was an exceptionally strong year for reinsurers, with the Gallagher Reinsurance Composite reporting a return on equity (ROE) of 19.3 percent, supported by strong underlying profitability and relatively benign natural catastrophe losses. 

Reinsurance dedicated capital reached a new high of $648 billion at year-end 2025, representing an 11 percent increase over the prior year, driven by retained earnings and inflows into alternative capital, per the report. 

Traditional reinsurance capital accounted for a majority of this growth, increasing to $513 billion, while non-life alternative capital rose significantly to $135 billion, reflecting one of the largest increases observed in the report's history, according to the report. 

The report notes that capital growth has outpaced revenue growth, creating a supply-demand imbalance in the market that has contributed to softening reinsurance rates observed during key renewal periods. 

Despite strong capital growth, revenue expansion slowed considerably in 2025, with the Composite's revenue growth declining to 1.2 percent, reflecting softer pricing conditions in property and specialty lines, per the report. 

Underwriting performance improved significantly, with the reported combined ratio for Reinsurance groups falling to 84.3 percent, the lowest level recorded since the report's time series began in 2014, according to the report. 

This improvement was supported by lower natural catastrophe losses and increased prior-year reserve releases, although underlying performance showed some deterioration due to rising attritional losses and softer market conditions, according to Gallagher Re. 

Global insured natural catastrophe losses declined to approximately $129 billion in 2025, below both the prior year and the 10-year average, with losses heavily concentrated in the United States, per the report. 

Investment performance also contributed to overall profitability, with total investment yields rising to 4.2 percent in 2025, supported by gains on investment portfolios and stable market conditions, according to the report. 

While reported ROE improved in 2025, underlying ROE declined modestly to 13.5 percent, reflecting a combination of softer underwriting margins and lower running investment income, according to Gallagher Re. 

Looking ahead, the report estimates that ROE will moderate to approximately 14 percent to 15 percent in 2026, assuming normalized catastrophe losses and continued rate softening, but is still expected to remain above the industry's cost of equity. 

Gallagher Re concludes that although profitability may decline from 2025 levels, the sector remains well-capitalized, with excess capital continuing to build and presenting ongoing challenges for deployment in a softening market environment.