Reinsurance buyers find choice and flexibility at 1.1 as capacity expands, says Gallagher Re

Gallagher Re’s latest 1st View report of January reinsurance renewals describes a renewal defined by choice, change and flexibility, following several years of hard-market conditions.

Reinsurance capital is expected to reach record levels by the end of 2025.

Traditional capital is projected to grow by around 8% to $710bn, while alternative capital is forecast to rise by roughly 12% to $128bn, taking total market capital to approximately $838bn, according to the broker’s estimates.

Sector profitability remained strong, the broker emphasised.

Headline return on equity for 2025 is estimated at around 17-18%, comfortably above the industry’s cost of capital and potentially the second-highest ROE of the past decade.

This was in a great measure because the bill of large insured catastrophe losses was relatively light compared with long-term averages.

Total insured losses were around 10% below the ten-year average and were more concentrated in non-peak perils.

Underlying activity nevertheless remained elevated, with 2025 marking the sixth consecutive year in which insured losses exceeded $120bn.

Only limited amounts of those losses flowed through to the reinsurance market, reflecting the structural shifts in catastrophe risk retention following the 2023 market reset.

Insurance-linked securities (ILS) continued to exert growing influence on market dynamics, Gallagher Re reported.

ILS issuance exceeded $20bn during the year, while alternative capital participation in long-tail lines roughly doubled, increasing competitive pressure on traditional reinsurance capacity.

At the 1 January renewal, the global property catastrophe market was notably dynamic.

Risk-adjusted pricing for non-loss-impacted catastrophe programmes fell by an average of 10-20% across major geographies.

Many buyers prioritised price reductions, although some elected to trade pricing for enhanced coverage in order to reduce volatility they had not previously reassumed.

Gallagher Re said it expects that trend to accelerate as 2026 progresses.

Despite the scale of price movement, catastrophe returns are still viewed as largely adequate.

US casualty flat

In casualty, discussions were dominated by concerns over the US litigation environment, prior-year loss development and elevated loss trends.

In the US, many casualty cedants were able to renew reinsurance pricing risk-adjusted flat, supported by stable capacity and extensive data analysis.

International casualty markets were more competitive.

Increased appetite for diversification led to higher ceding commissions and risk-adjusted rate reductions of between 5 -10%.

Specialty reinsurance continued to benefit from an oversupply of capital and expanding reinsurer appetite across most lines.

Loss-free specialty programmes achieved significant exposure-adjusted pricing reductions, although energy remained under closer scrutiny following losses during 2025.

Coverage terms were also a key focus, the broker observed.

Clients prioritised consistency in war event definitions and alignment between reinsurance contracts and underlying business, while aircraft leasing losses continued to shape negotiations for large and complex programmes.

“The 1/1/26 renewal represented further price reduction and structural flexibility,” said Tom Wakefield, global CEO of Gallagher Re.

“Our top priority for the year ahead is working with our clients to tailor their reinsurance buying strategies at a moment of abundant capacity across all lines of business. There are plenty of options and opportunities to improve reinsurance coverage, and we intend to explore all of them,” he added.