Aon Reports Record Global Reinsurance Capacity and Buyer-Friendly Midyear 2025 Market Conditions
Global reinsurance capacity has exceeded $720 billion in the first quarter of 2025, marking a slight increase from $715 billion at the end of 2024. This expanded capital base is driven primarily by retained earnings and a significant influx of alternative capital, notably from catastrophe bonds, which reached record issuance levels of over $16.8 billion in the first half of 2025.
The growth in catastrophe bond activity, including the largest deals to date surpassing $1.5 billion each, reflects robust investor demand and is reshaping the reinsurance landscape by supplementing traditional capital sources.
Despite recent substantial catastrophe losses, including $40 billion from California wildfires and around $60 billion overall insured losses in the first quarter, most major reinsurers reported strong financial results with double-digit returns on equity and an average combined ratio of 98.7%, indicating overall profitability in Q1 2025. This capital abundance has created a buyer-friendly environment, allowing reinsurers’ clients – insurers ceding risk – to negotiate improved pricing, broader terms, and expanded coverage options amid a competitive market.
Geographically, US insurers with clean loss records secured low double-digit rate reductions on loss-free property catastrophe placements, while loss-impacted programs, particularly in California, experienced flat or increasing rates due to recent severe weather events. Florida's insurance market demonstrated stabilization attributed to legal reforms, updated building codes, and legislative changes affecting its state insurer of last resort, Citizens. This stabilization led to greater reinsurer flexibility and moderate price reductions despite increased demand as over 600,000 policies transitioned to private insurers since 2023.
In Latin America and the Caribbean, the market softened following the 2023-24 hardening cycle, with sufficient capacity and limited catastrophe activity supporting modest rate decreases and wider adoption of facultative and proportional reinsurance solutions. Brazil saw increased investment in catastrophe limits partly bolstered by a new flood risk model introduced by Aon. Australia and New Zealand benefited from additional capacity and reduced catastrophe losses, assisted by a government-backed reinsurance pool mitigating impacts like those from Cyclone Alfred, enabling rate reductions in the high single to low double digits and growing interest in structured and aggregate risk solutions.
The casualty reinsurance market remained stable with reinsurers attentive to litigation and nuclear verdict risks but recognizing favorable conditions such as higher interest rates, strong pricing, and prospects for tort reform. Innovations emerged in the cyber insurance space, including a new stop-loss cover designed to limit exposure to systemic cyber event claims that are not attributed to a specific incident. Pricing in cyber reinsurance was generally favorable, and capacity abundant, although margin pressures have surfaced amid softening underlying insurance rates.
Looking forward to 2026 and beyond, industry specialists advise reinsurers and insurers to capitalize on current favorable market conditions while remaining vigilant about potential volatility stemming from geopolitical risks, social inflation, and the North Atlantic hurricane forecast, which is predicted to be above average. Competitive tension is most pronounced in the middle layers of reinsurance programs, where both traditional and alternative capital compete for market share. Market participants emphasize the importance of collaboration to develop sustainable solutions which will maintain the sector's health and resilience.