Gallagher Re has observed a notable increase in capacity and flexibility for reinsurance buyers during the 1 April renewal period, with improvements varying by class of business, geography, performance, strategy, and scale.
Traditional reinsurance capital reached a record USD 655 billion, driven by strong reinsurer results in 2023 and early 2024. Many reinsurers are optimistic, projecting double-digit returns on equity for 2025, assuming catastrophe losses remain within expected limits.
While reinsurers are targeting growth, they are also managing expectations regarding achievable results in 2025. There has been a marked increase in dividends and share buybacks as companies look to deploy surplus capital efficiently.
In the primary insurance market, performance has been mixed, influenced by localized losses and ongoing portfolio adjustments. Events such as the California wildfires have highlighted the critical role of insurance in recovery efforts and raised concerns about the handling of secondary perils.
In Japan, rate softening has been more significant than in other major markets. High catastrophe pricing following the 2018 and 2019 typhoons has resulted in more favorable terms for buyers in 2024. Reinsurers’ appetite for growth across multiple lines has further supported this trend.
In the specialty sector, the settlement of aircraft leasing losses related to the Russia-Ukraine conflict has led to reserve increases. The market continues to focus on selectively reducing rates based on performance, striving to maintain profitability while correcting underperforming accounts.
Looking ahead, reinsurers face increasing pressure to demonstrate profitable capital deployment. This may lead to higher shareholder returns or more merger and acquisition activity. While smaller acquisitions are already gaining traction, the possibility of large-scale M&A in the reinsurance sector remains on the horizon.
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