AM Best has noted that the property reinsurance market remains stable at mid-year 2025, with modest softening appearing at the highest attachment layers, yet the agency expects overall conditions to remain robust through year-end.
The rating agency has suggested that industry capital has also grown rapidly, supported by stronger retained earnings and reduced mark-to-market investment losses.
“Notably, the absence of new start-up reinsurers enabled incumbents to preserve market share without resorting to softer terms,” AM Best said.
The rating agency additionally stated that as of mid-year 2025, the property reinsurance market remains stable with signs of modest softening emerging at the highest layers of attachment.
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“Reinsurers have remained diligent on attachment points and terms throughout the rate softening, which is believed to be the main factor driving their continued success,” AM Best added.
With this in mind, AM Best has anticipated that the reinsurance market will continue to thrive throughout 2025.
“While reinvestment yield might marginally decrease, the market should again be able to generate returns on equity by year-end 2025 in the low-to-mid teens. Capital growth could always be dampened by dividends, as well as a highly active hurricane season,” the rating agency said.
Despite this uncertainty regarding the remainder of the 2025 hurricane season, the reinsurance market reportedly remains well-positioned to absorb a reasonable level of losses and still grow capital.
In fact, as per recent estimates from AM Best and Guy Carpenter, global dedicated reinsurance capital is projected to climb to an unprecedented $649 billion in 2025.
The anticipated 2025 figure would surpass the previous peak of $607 billion recorded in 2024 and mark a sharp rebound from the pandemic-era volatility seen in 2020–2022.
AM Best concluded, “As we approach the height of the US hurricane season, which always brings the potential for outsized losses, the results may affect not just the reinsurance market, but also the insurance market as a whole.
“Severe convective storms and large cat events have stressed both cedents and reinsurers over the last year. The market, however, has been resilient despite the impact of the California wildfires eroding cat budgets and creating uncertainties about the loss costs.
“The resilience of reinsurers can be mainly attributed to the accumulation of retained earnings and strong investment yields, which have established solid capital buffers.”
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