Global reinsurers beat capital costs for the third straight year

Median return on equity reached 16.3% in 2025.

Global reinsurers posted returns well above their cost of capital in 2025, marking a third consecutive year of outperformance as repricing and derisking of portfolios drove strong underwriting results, according to a new report from AM Best.

The report, titled "Reinsurers' Returns Exceed Cost of Capital Despite Softening Market," also showed that the industry's weighted average cost of capital rose to 8.23% in 2025, up from 7.67% in 2024, and climbed further to 8.63% in the first quarter of 2026. 

At the same time, high levels of capital and capacity in the global market have fuelled a softening trend that gathered pace this year.

Helen Andersen, industry analyst at AM Best, said reinsurers' adjustments to programme structures, including tighter terms and conditions and sharply higher attachment points, had held firm despite the softer market. 

She said these measures had helped reinsurers cope with the increased frequency and severity of secondary perils.

Most reinsurers delivered strong results in 2025, with a median return on equity of 16.3%, only slightly below the record levels of 2023. 

The cost of equity rose for a fourth consecutive year, to 9.6%, which pushed up the overall cost of capital despite lower interest rates.