Gallagher Re sees increased capacity, flexibility for reinsurance buyers

Many reinsurers also anticipate double-digit returns on equity in 2025.

Gallagher Re saw an increased capacity and optionality for reinsurance buyers in the 1 April renewal period. 

Improvements varied by class of business, geography, performance, strategy, and scale.

Traditional reinsurance capital reached a record USD 655b, driven by strong reinsurer results in 2023 and early 2024. 

Many reinsurers anticipate double-digit returns on equity in 2025, provided catastrophe losses stay within projected budgets.

Whilst reinsurers are targeting growth, they are managing expectations around how much can realistically be achieved in 2025. 

There has been a noticeable increase in dividends and share buybacks, as companies respond to pressure to use surplus capital effectively.

In the primary insurance market, performance has varied due to localised losses and ongoing portfolio adjustments. 

Recent events such as the California wildfires continue to underline the importance of insurance in recovery efforts and have raised concerns about how secondary perils are handled.

In Japan, rate softening has been more pronounced than in other major markets. High catastrophe pricing following the 2018 and 2019 typhoons has contributed to improved terms for buyers in 2024. 

Reinsurers’ appetite for growth across multiple lines has also 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 remains focused on selectively reducing rates based on performance, aiming to preserve profitability whilst correcting underperforming accounts.

Looking ahead, reinsurers face pressure to prove profitable capital deployment. This could lead to more shareholder returns or increased merger and acquisition activity. 

Whilst smaller acquisitions are already gaining traction, large-scale M&A in the reinsurance sector remains a possibility.