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The reinsurance market has continued to attract sizeable capital in 2025 despite volatility in the global markets and Q1 losses.
This was according to a new white paper by Guy Carpenter, which said insured loss activity neared $70 billion through the first half of 2025, but reinsurance renewal trends seen at January 1 continued.
These trends included strong reinsurer balance sheets that drove appetite for growth, excess property capacity and moderate pricing, as well as reinsurers focusing on holistic client relationships to grow their portfolios, and “disciplined” casualty underwriting.
“The current trading environment is one of the most favourable for reinsurers in many years, evidenced by the additional capital being attracted to the sector,” Dean Klisura, President and CEO, Guy Carpenter. “More capacity will continue to moderate pricing, give clients more diversification of reinsurance partners, and provide better solutions to protect earnings.”
“Losses for the first half of 2025 are now flat compared
to the inflation-adjusted five-year average."
This is good news for reinsurers with large investment portfolios as these market conditions could allow them to create capital efficient portfolios to help enhance yield, improve returns, and optimise capital. They could use this time to consolidate returns ahead of any downturn.
However, the current circumstances for reinsurers derive from a mixed bag of affairs in the market so far in 2025. According to Guy Carpenter, insured loss activity in Q2 levelled off from Q1, which saw large losses after the LA wildfires. Natural catastrophe losses were mixed in with market volatility after President Trump's tariffs announcements.
“Losses for the first half of 2025 are now flat compared to the inflation-adjusted five-year average,” Guy Carpenter's report said. “The Los Angeles wildfires account for $40 billion in insured losses or 59% of activity in the first half of 2025. For reinsurers, the wildfires are not expected to impair capital or appetite for the remainder of the year.”
This figure offers some comfort for reinsurer's that announced painful losses from the tragic events in LA. In its latest financial results announcement, the German reinsurance giant Munich Re said it has “[posted a] net result of €1.1 billion in Q1 despite high major-loss expenditure”. This compared to €2.1 billion in the same period last year. In its press release, it said its combined ratios were above target values for property-casualty reinsurance – at 83.9% – and for Global Specialty Insurance, they sat at 95.5%, “due to LA wildfires”.
“The industry is well positioned to deliver strong results in 2025,
and further meaningful capital growth."
The strength of the reinsurance industry's financial are not new though, nor its attractiveness to capital investors.
In April, Gallagher Re said that the reinsurance industry’s reported and underlying return on equity (ROE) remained well above the cost of capital, supported by further improvement in the underlying combined ratio and increased recurring investment income.
“The industry is well positioned to deliver strong results in 2025, and further meaningful capital growth,” it said.
The sound investment footing could enable reinsurers to weather increasingly volatile market conditions and allow more appetite for high-risk investments, it added.
Earlier this year, Fitch Ratings said that Europe’s big four reinsurers had a successful 2024, which set them up to weather the shocks and volatility of 2025 better than previously thought.
In a report on the economic fortunes of the companies – France's SCOR, Germany’s Munich Re and Hannover Re and Switzerland’s Swiss Re – the report highlighted that good investment yields were all playing a part in this.
Guy Carpenter said that despite loss activity in Q1, strong reinsurer performance is expected to continue into the latter half of 2025 reflecting a strong year overall.
“Reinsurer returns on equity were 16% in 2024 and are projected to be 15% in 2025,” it said. “Reinsurance capital closed 2024 at an all-time high of $607 billion.”
They added there was an expectation that this trend would continue, with capital growth of 5% to 7% by year-end 2025.
