Total dedicated reinsurance capital is expected to reach US$649 billion in 2025, extending increases seen in the past two years, according to a new AM Best report.
Traditional reinsurance capital rose by about $32 billion, or 7%, to US$500 billion in 2024. The increase reflected underwriting results, retained earnings and higher investment yields. While a wave of new startups has not materialized, established reinsurers added to capital through secondary equity offerings and earnings retention.
Investor demand for catastrophe bonds also contributed to growth in third-party capital and supported overall capacity.
AM Best’s prior reading on the capital trajectory showed dedicated reinsurance capital rose 7% to US$568 billion in 2023, with a year-end 2024 projection of US$620-US$625 billion. Within that, traditional capital was estimated to increase 10% in 2024 after a US$57 billion rise in 2023 to $468 billion, while third‑party capital was expected at US$105-US$110 billion, reflecting record catastrophe bond issuance and steady collateralized capacity.
“Reinsurers continue to transition toward more diversified and balanced business models, including a growing allocation to primary and specialty insurance lines, reflecting a deliberate move away from purely relying on property catastrophe risk,” said Antonietta Iachetta, associate director, AM Best.
Third-party reinsurance capital increased 7% in 2024 to US$107 billion, the report said. AM Best estimates traditional reinsurance capital and works with Guy Carpenter to determine the third-party capital figure. For 2025, third-party capital is estimated at US$114 billion, driven largely by record catastrophe bond issuance.
“Assuming a more normal level of catastrophic events, reinsurers are on pace to report upper-single-digit capital growth in 2025,” said Dan Hofmeister, associate director at AM Best.
S&P Global’s own outlook for the sector points to stability through 2025, underpinned by strong operating profits, robust capitalization, and combined ratios that improved to the low 90s in 2023 and remained favorable through much of 2024. The view acknowledges ongoing risks from natural catastrophes, social and economic inflation, and geopolitics, but anticipates reinsurers earning their cost of capital while preserving underwriting discipline.
Casualty market dynamics remain a watchpoint alongside capital growth. AM Best highlighted that reinsurers implementing 8%-10% casualty rate increases may still trail loss‑cost trends tied to social inflation, contributing to reserve strengthening in 2024 and selective pullbacks in some programs ahead of renewals.
Analysts also pointed to rising litigation costs and funding as factors sustaining pressure on long‑tail lines.
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