Reinsurers' Strong Capital Positions Offer Cedents Renewal Leverage

The global reinsurance market continues to demonstrate resilience and profitability despite elevated natural catastrophe losses and persistent geopolitical and macroeconomic uncertainty, according to Guy Carpenter, a subsidiary of Marsh McLennan.

Heading into the 2026 renewal cycle, insurers are in a favorable position as reinsurers report strong earnings, robust capital levels, and sustained capacity. Guy Carpenter estimates that dedicated reinsurance capital will reach approximately $650 billion by the end of 2025. Supply is outpacing demand, intensifying competition and encouraging reinsurers to seek profitable ways to deploy excess capital.

Dean Klisura, president and CEO of Guy Carpenter, said, "The reinsurance market is strong, seen in record levels of capital and reinsurer returns. Reinsurers' appetite for growth creates an opportunity for innovative solutions that help cedents manage in a volatile world and protect against the increasingly complex range of risks they face."

From 2021 to 2024, insured natural catastrophe losses averaged $130 billion annually. Still, reinsurer profitability has held, with Guy Carpenter estimating reinsurers could absorb up to $80 billion in catastrophe-related losses without materially weakening capital positions.

The financial strength of the market is being supported by solid investment income and a shift away from higher-frequency, lower-severity catastrophe coverages, such as severe convective storms. This has increased volatility for insurers, many of which have raised their retentions and are now pursuing alternative coverage strategies. Meanwhile, reinsurers have benefited from reduced loss exposure and improved margins, leading to greater appetite for growth.

Looking ahead to the January 1, 2026, renewals, Guy Carpenter expects current market dynamics to largely persist, barring significant catastrophe losses or geopolitical shifts. Insurers with favorable loss histories may find more flexibility in structuring their programs. Differentiation, underwriting discipline, and data quality remain essential for successful negotiations.