Gallagher Re has observed a notable increase in both capacity and flexibility for reinsurance buyers during the 1 April renewal period, as the industry continues to adjust to market dynamics.
This growth in capacity and options varied by class of business, geographic location, company performance, and overall strategy. Traditional reinsurance capital reached a record high of USD 655 billion, driven by strong financial results from reinsurers in 2023 and early 2024. Many reinsurers are now forecasting double-digit returns on equity for 2025, assuming that catastrophe losses stay within the projected budgets.
While reinsurers are targeting expansion, they are cautious in their expectations for growth in 2025. A marked increase in dividends and share buybacks has been observed as companies respond to pressure to effectively deploy surplus capital.
The primary insurance market has experienced mixed performance, with localized losses and ongoing portfolio adjustments influencing results. Notably, events such as the California wildfires have underscored the critical role of insurance in recovery efforts and raised concerns over the management of secondary perils.
In Japan, there has been more pronounced rate softening compared to other major markets. The high catastrophe pricing following the 2018 and 2019 typhoons has contributed to better terms for buyers in 2024. Reinsurers’ appetite for growth across various lines of business has also supported this trend.
In the specialty sector, the resolution of aircraft leasing losses tied to the Russia-Ukraine conflict has led to reserve increases. Despite this, the market remains focused on selectively reducing rates based on performance, with an emphasis on maintaining profitability and correcting underperforming accounts.
Looking ahead, reinsurers are under increasing pressure to demonstrate profitable capital deployment. This could lead to higher shareholder returns or spur merger and acquisition activity. While smaller acquisitions are already gaining momentum, the possibility of large-scale mergers and acquisitions in the reinsurance sector remains on the horizon.
Related topics
