According to the latest AM Best analysis, global reinsurers met the cost of capital for a second consecutive year in 2024, after four years of failing to do so, despite catastrophes like the California wildfires, driven by strong market performance.
Most reinsurers had very strong returns on equity in 2024, if not as exceptional as 2023, with a median of 15.67% which is lower than last year, but still significantly higher than any in the past decade.
The returns were also due to positive underwriting results driven by repricing and de-risking of reinsurance portfolios.
Returns were lower in the first half of 2025 due to natural catastrophe losses, but stayed well above the cost of capital.
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AM Best anticipates that reinsurers who combine long-term strategic planning with agile tactical decision-making and robust risk management will be well-positioned to meet market expectations in 2025.
Helen Andersen, Industry Analyst, AM Best, commented, “The current hard market conditions in the reinsurance segment are being driven primarily by the memories of historical prolonged underperformance, compounded by the abundant capital due to the extended low interest rate environment.”
2024 marked the fifth year in a row in which global insured losses exceeded $100 billion, according to Swiss Re.
The majority of insured losses were due to numerous small-to-medium-sized events and, owing to higher attachment points, most of the impact was retained by primary insurers.
Some factors that subdued the cyclical nature of the market include sound risk management, strategic use of technology, and the global reinsurance sector’s maturing partnership with alternative capital.
Additionally, reinsurance rates shot up in 2023; however, increases are said to be slowing.
Broker Guy Carpenter calculated a 6.2% decrease in rate-on-line at January 1st, 2025, for both US and European property catastrophe reinsurers, after a moderate increase of 5.4% in 2024, compared with nearly 30% in 2023.
However, there was some differentiation in 2025 renewals, as some loss-affected reinsurers saw steep price increases, explained AM Best.
Sridhar Manyem, Senior Director, Industry Research and Analytics, AM Best, added, “Reinsurers have also implemented thorough derisking measures, such as tightened terms and conditions and a sharp increase in attachment points, which are unlikely to be loosened.”
Market conditions indicate more sustainable pricing momentum, enhancing reinsurers’ ability to meet their cost of capital over the medium term.
The latest AM Best analysis is part of the firm’s look at the global reinsurance industry ahead of the Rendez-Vous de Septembre in Monte Carlo.
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