Buyers generally experienced a more competitive reinsurance market at the July 1 renewal compared to recent years, with capacity available even where demand increased, and reinsurers looking to grow. Clients were largely able to secure risk-adjusted rate reductions for property treaties and were well-placed to hold pricing broadly flat in casualty lines — in part, as underlying pricing increases continue to flow through to reinsurers. With these conditions in place, clients had the opportunity to challenge the status quo, and secure improvements to the structure and terms of their property and specialty reinsurance programs.
Reinsurers came into the renewal in good financial shape. They reported strong results for 2024, with ROEs well above the cost of capital. Q1 results were weaker due to the impact of January's unprecedented wildfires in Los Angeles, California, but barring further exceptional cat events, reinsurers remain on track for another good year overall. Total reinsurance dedicated capital hit a new peak of USD769 billion at the year-end 2024. As noted in Gallagher Re's Reinsurance Market Report in April, reinsurers are currently on track to deliver healthy ROEs in the mid-teens for 2025, with traditional reinsurance capital set to increase by another 6% (assuming average results for the rest of the year).
Outlook
2025's renewals are showing a consistent trend: a growing market in which the balance of supply and demand has tilted back toward reinsurance buyers. The scale of the changes we have seen in underlying pricing and underwriting actions in recent years cannot be overstated. North American casualty, for example, has seen five consecutive years of material compound rate increases and additional loss mitigation strategies, to correct the well-known challenges.
After several highly profitable years, reinsurers are increasingly looking to deploy their significant capital, but they are disciplined in approach. In some businesses and geographies, we are still seeing reinsurers willing to sacrifice share to protect profitability — particularly larger, less growth-oriented players.
In the property market, greater reinsurer flexibility on aggregates and per risk will be welcomed, but there is plenty of work to be done on the detail, and on evidencing a compelling story. Insurers can also expect continued close scrutiny of their underwriting practices in US casualty, in a sharply differentiated market where transparency of data and robust evidence of underwriting discipline remain crucial. The most active months of the North Atlantic hurricane season in Q3 will be particularly important to the industry's finances this year, following Q1's LA wildfire losses. Forecasts continue to predict an "above average" season, albeit reduced from 2024.
At the April renewal, we commented that if there were no major unexpected events in the remainder of 2025, it was likely that reinsurers' differentiated approach to risk-adjusted rate reductions would continue. So far, the market is supporting this view. This is a market where cedants and brokers have room to maneuver and reinsurers to innovate — and we are pushing beyond rates to a broader optimization of reinsurance placements.
