Global reinsurance industry capital reached US$805 billion at mid-year 2025, marking a 4.8% increase from the revised full-year 2024 figure, according to Gallagher Re’s latest Reinsurance Market Report.
The report noted that the underlying return on equity (ROE) for a group of 16 reinsurers declined to 12.6%, compared to 15.2% for the same period last year.
Gallagher Re attributed the decrease in underlying ROE to factors outside of property and casualty reinsurance underwriting or investment income. The reported ROE remained at 17.7%, down from 19.6% at the 2024 half-year mark. Both headline and underlying ROE continue to exceed the average cost of capital by 1.5 to 2 times.
The Big Four European reinsurers – Munich Re, Swiss Re, Hannover Re, and SCOR – achieved a record average ROE of 21.1% in the first half of 2025, despite elevated catastrophe losses.
Michael van Wegen (pictured above), head of client and market insights international at Gallagher Re Global Strategic Advisory, said global reinsurers are positioned to maintain strong profitability in 2025. He projected an underlying ROE of 13% to 14% and a headline ROE of about 17% to 18% for the full year, assuming a typical level of catastrophe losses in the second half.
“Both of which remain significantly (1.5-2x) above the industry’s cost of capital. Supported by continued strong profitability, we expect traditional reinsurance capital to increase by roughly 8% in 2025,” van Wegen said.
The report also showed that the reported and underlying combined ratios for the subset of reinsurers rose to 87.5% and 94.7%, respectively, compared to 84.6% and 94.2% at the 2024 half-year. These ratios are considered strong by historical standards and have only been surpassed once since the report’s inception in 2014.
According to AM Best, global reinsurers have met or exceeded their cost of capital for the second consecutive year, with the industry’s weighted average cost of capital declining to 6.66% in the first quarter of 2025, from 7.66% in 2024. This trend is attributed to strong market conditions, improved risk management, and a growing partnership with alternative capital providers.
Natural catastrophes contributed 9.6% to the combined ratio, slightly above the normalized level of 9.0%. The first half of the year saw an unusually high impact from events such as the California and Los Angeles wildfires. However, these losses were partially offset by increased investment gains, which added 3.4 percentage points compared to 0.8 points previously, and higher prior year releases, which contributed 2.0 points versus 0.7 points a year earlier.
Gallagher Re estimated global insured catastrophe losses at US$82 billion for the first half of 2025, the highest for any first half in the past decade.
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