Global reinsurers reported a 5.4% increase in dedicated capital in 2024, bringing the total to US$769 billion, according to Gallagher Re’s full-year 2024 Reinsurance Market Report.
The rise was supported by strong retained earnings, improved underwriting profitability, and increased recurring investment income. The firm stated that the industry remains positioned for continued growth in 2025.
The “INDEX” cohort of reinsurers, which represents over 80% of global industry capital, recorded a 5.3% increase to US$629 billion. This was driven by US$117 billion in net income, partially offset by US$58 billion in capital returns and US$23 billion in unrealized investment losses, the latter primarily from National Indemnity.
Gallagher Re said solvency levels remained high among top European reinsurers, with an average solvency ratio of 265%, compared to 273% in 2023. The report also noted that capital supply outpaced premium growth within the INDEX group.
In 2023, the global reinsurance market experienced significant growth and profitability. According to Gallagher Re, dedicated reinsurance capital reached US$729 billion by the end of the year, marking a 12% increase from the previous year's restated figures. This growth was driven by both traditional reinsurers and the non-life alternative capital sector.
An analysis of a subset of 16 reinsurers revealed an improvement in the reported combined ratio, which decreased to 88.9% from 94.6% in 2022. The underlying combined ratio also improved to 96% from 98.5% the previous year. These figures indicate enhanced underwriting profitability within the industry.
The reported return on equity (ROE) for these reinsurers rose to 20.2% in 2023, up from 7.1% in 2022. This increase was largely attributed to higher investment gains and a reduced impact from natural catastrophes. The underlying ROE also saw a notable rise, reaching 14.3% compared to 12% in the previous year.
Among INDEX firms that disclosed detailed figures (the SUBSET), full-year revenue rose by 8.1% in 2024, supported by higher property and casualty rates. However, exposure growth remained subdued as reinsurers scaled back participation in US casualty lines.
The reported combined ratio for the SUBSET improved by 0.5 percentage points to 86.8%, aided by a 3.2-point reduction in the ex-catastrophe accident year loss ratio.
Offsetting factors included a 0.6-point increase from natural catastrophe losses, a 1.2-point reduction in reserve releases, and a 0.7-point rise in expense ratios. Natural catastrophe losses accounted for 7.6% of the combined ratio, below the normalized level of 9%.
Total insured catastrophe losses rose to US$154 billion in 2024 from US$123 billion in the prior year, according to Gallagher Re estimates. The SUBSET’s share of those losses fell to 6.9%, compared to 7.3% in 2023 and 9.2% in 2022, reflecting higher attachment points and the structure of recent events.
Prior-year development reduced the combined ratio by 0.6% in 2024, largely due to Swiss Re’s US$2.6 billion reserve strengthening. Excluding this, reserve releases provided a 2.5% benefit, driven by favorable development on property lines, which offset increases in U.S. casualty reserves.
The SUBSET’s underlying combined ratio declined to 93.0%, from 96.0% the previous year – the lowest recorded since the inception of Gallagher Re’s report in 2014.
The SUBSET posted a reported return on equity (ROE) of 17.0% for 2024, compared to 19.5% the prior year. The underlying ROE held at 13.9%, despite losses in areas outside of P&C underwriting, including SCOR’s life and health reserving and Everest’s primary P&C reserve actions. Gallagher Re estimated that excluding these one-offs would bring underlying profitability to around 15%.
Assuming normal catastrophe activity and stable investment markets, the SUBSET is projected to achieve an underlying ROE of approximately 15% in 2025. If prior-year development and capital gains match their 10-year averages, the headline ROE could reach 18% to 19%, or about twice the industry’s weighted average cost of capital.
Gallagher Re stated that reinsurers appear well capitalized to absorb potential natural catastrophe volatility. Early 2025 insured loss estimates from the Southern California/Los Angeles wildfires are currently between US$35 billion and US$40 billion. Large reinsurers have indicated these events could represent 25% to 33% of their annual nat cat budgets.
If these wildfire losses are incremental to typical annual catastrophe totals, Gallagher Re estimated a 2-3 point reduction to the SUBSET’s headline ROE. Despite this, the group is still expected to earn a return above the cost of capital. At the industry level, the wildfires’ impact is estimated to be 1.3 points on headline ROE, which would also remain above capital costs.
Based on projected profitability, Gallagher Re expects traditional reinsurance capital to grow by an additional 6% in 2025. This projection assumes continued earnings strength even as capital return levels remain elevated. The report concludes that the sector’s financial condition and performance trends support expectations for another year of positive capital development.
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