Worldwide reinsurance capital climbed 4.8 per cent to a record $805bn (£595bn) during the first half of 2025 and remains on course to rise by eight per cent overall, bolstered by sustained strong profitability and additional non-life alternative capital, according to Gallagher Re's half-year 2025 Reinsurance Market Report.
The sector has maintained its expansion despite facing heightened loss levels, as reported by .
Based on Gallagher Re projections, the opening six months of 2025 represented the most expensive period since 2011, with worldwide insured natural catastrophe losses reaching at least $84bn, standing 55 per cent above the decade-long average.
Nevertheless, despite setbacks, the capital inflow and rate easing across certain segments mean reinsurance leaders are anticipated to sustain their recent streak of solid profitability, the report indicates.
Reinsurance capital continues to grow
Gallagher observed that worldwide reinsurance dedicated capital expanded 4.8 per cent during the first half of 2025, propelled by both conventional reinsurance capital (five per cent) and nonlife alternative capital (3.6 per cent).
Michael van Wegen, head of client & market insights international, Gallagher Re Global Strategic Advisory, told City AM: "While the growth percentage for alternative capital and traditional reinsurance capital isn't too dissimilar in our half-year estimates, the absolute amounts are very different.
"For alternative capital, we're talking about a single-digit US dollar billion number, while for the traditional reinsurance market, it's close to about $33bn in the first half alone. So traditional reinsurance capital is still very much the significant driver of overall capital growth."
In light of this expansion, the insurance behemoth has updated its full-year projections.
Previously, it had anticipated six per cent growth for 2025.
Following the robust first-half performance, it has now forecast eight per cent growth in total global reinsurance capital for the year.
Gallagher's INDEX firms, comprising the world's 45 largest publicly-traded reinsurers that account for 82 per cent of the sector's capital, registered a capital rise of $31bn or five per cent to $660bn during the first six months.
Retained earnings served as the primary catalyst for this expansion, contributing $15bn or half of the group's capital growth.
The reported combined ratio of firms tracked by Gallagher climbed to 87.5 per cent (2024 HY: 84.6 per cent), propelled by a worsening in the natural catastrophe loss ratio of +4.4 percentage points (ppts), and a weaker expense ratio (+0.9ppts), partially counterbalanced by higher prior year reserve releases (+2.2ppts).
Notwithstanding the elevated combined ratio, return on equity for the cohort of major reinsurers featured in the analysis reached 17.7 per cent for the first half, declining from 19.6 per cent in the corresponding period last year, yet remaining substantially above reinsurers' weighted average cost of capital. Michael van Wegen suggests this pattern will persist, as reinsurers have fundamentally altered their approach to risk assessment.
Michael van Wegen says: "Looking at their renewal updates, you can see that they're willing to let some business go where they felt rates weren't doing what they wanted. So, I think there's an element of a conscious decision based on where the cycle is going."
Investment portfolios boost returns
The leading insurers monitored by Gallagher delivered net income of $28bn during the first half, bolstered by robust underwriting performance and investment profitability.
Berkshire Hathaway's National Indemnity contributed $3bn to net income through realised investment gains, as US investor Warren Buffett continued offloading his position in technology behemoth Apple amid the stock's recent rally.
The aggregate investment return for the 45 companies under review climbed from four per cent last year to five per cent in the opening six months of 2025.
Nevertheless, the overall running yield of portfolios held steady at 3.8 per cent as Bermudian firms reduced portfolio risk.
In total, the principal companies distributed 47 per cent of net income to investors via dividends and share repurchases. Despite some market softening in certain sectors, Gallagher estimates it would require "a $115bn insured loss event, which equates to a circa 1-in-20 event in the vendor models, on top of normalised natural catastrophe losses to reduce the average industry ROE for the 2017-2025 period to a double-digit (10 per cent) level."
Addressing the rate declines and loss environment, Michael van Wegen remarks: "We're coming from extremely attractive underlying profitability as a starting point. So, the price declines we've seen this year don't mean that the business is unattractive-it's probably still generating pretty substantial returns.
"While there has been some softening, we're still getting to a full-year headline ROE outlook of 17 per cent to 18 per cent and an underlying ROE outlook of 13 per cent to 14 per cent. Those are not bad numbers, whether you take them at an absolute level or in the historic context of the industry," he concludes.
