The reinsurance market in 2025 remains in a strong capital position, with global reinsurance capital reaching almost US$800 billion, driven by above-average retained earnings, favourable investment yields, and growing investor interest in insurance-linked securities.

Moreover, the top four reinsurers, which have a combined market share exceeding 40%, have been reporting exceptionally strong financial results for the first half of this year.

Record returns amid rising catastrophe costs

According to reports available from official ratings agencies, the reported combined average return on equity of these firms is around 21.1%, exceeding the previous peak of 20.5% from 2023.

From a claim’s perspective, global insured losses from natural catastrophes in the first half of 2025 (January to June) totalled approximately US$80 billion to US$100 billion, which is roughly double the 10-year average and the second-highest of any year since 1980. The Palisades wildfires in the greater Los Angeles area resulted in the costliest natural disaster during the first half of this year, with overall insured losses estimated at around US$40 billion - no recorded wildfire has previously caused such extensive damage. Despite this loss activity, the industry remains resilient. But why is this important?

Besides the peace of mind and positive sentiment created in the market, a strong reinsurance market is critical for absorbing catastrophic risks and major shocks across our economies. Furthermore, this strong capital position and positive performance have led to a buyer-friendly cycle for reinsurance purchasers. Similarly, it has empowered brokers and provided a constructive environment where we can deliver new, innovative, and tailored solutions to our customers.

Navigating pricing shifts and climate risk in insurance

From a pricing perspective, we have experienced a noticeable shift across most classes of insurance, which is primarily due to increased competition as new capital has been injected into the global underwriting market. Interestingly, we have found that much of the underwriting discipline from previous years appears to have remained, with the quality of data, prudent risk management, and an alignment of interests through adequate retention levels remaining prerequisites for successful negotiations. Whilst discipline remains, as brokers, we need to ensure that any temporary under-pricing of complex risks is managed correctly and does not negatively affect long-term portfolio stability, as well as client perceptions of the markets.

According to the World Economic Forum’s 2025 Global Risk Report, extreme weather events continue to dominate as the most significant perceived risk to the world and our economies over the next ten years. From a local insurance perspective, whilst there has been an increase in weather-related losses, there is a notable contrast in the severity of losses to the African continent versus other high-risk regions globally. It can be argued that the severity of losses may be tied to low insurance penetration rates and overall exposure; however, we feel the African continent remains an attractive option for reinsurers seeking to diversify their global portfolios.

Navigating unpredictable weather-related risk, economic volatility, and regulatory complexities has presented us with both challenges and opportunities. For most businesses, failure to manage these risks effectively is an existential threat. As brokers, we are closer to our clients than ever before; we are asking questions and gaining deeper insights into their operations, supply chains, and processes to develop solutions that balance affordability with robust protection.

Tailored, forward-thinking solutions

Having an intimate understanding of our clients and their operations has never been more critical, and looking beyond the scope of traditional solutions is non-negotiable. Furthermore, it is our view that developing and structuring customisable solutions that enable our clients to benefit from exceptional risk management truly will be the future.

Our reinsurance market, which has stood the test of time, remains the cornerstone of the many solutions we continue to develop, and it acts as our safety net when catastrophe strikes. To capitalise and keep pace with our surroundings, we need to be forward-thinking problem solvers, rather than mere placers of policies. With this in mind, we believe the true risk which many clients face is not necessarily the uncertainty that lies ahead, but rather the failure of their broker to act.

Ryan Shepard
Divisional Executive: Bespoke and Reinsurance Solutions