In the first half of 2025, the global reinsurance landscape witnessed substantial capital expansion, with alternative reinsurance capital reaching $118 billion, marking a $4 billion increase. This upward trend, as reported by Gallagher Re, underscores a period of robust financial health within the industry. Notably, traditional reinsurance capital demonstrated even stronger growth, indicating a broad-based strengthening of the sector's financial foundations. This growth is primarily attributed to healthy retained earnings, allowing reinsurers to bolster their capital reserves significantly.
The latest Reinsurance Market Report from Gallagher Re reveals that global reinsurance industry capital collectively ascended to $805 billion by mid-2025, reflecting a 4.8% surge from the close of 2024. This notable increase was fueled by robust profitability and strategic capital retention among global reinsurers. While returns on equity (ROEs) experienced a slight moderation compared to the previous period, they remained impressively high, comfortably surpassing the cost of capital. This sustained strong performance signals a positive outlook for the industry's financial stability and growth trajectory.
A closer examination of the INDEX companies, which account for a significant 82% of the total dedicated reinsurance capital, showed their capital rising by 5% to $660 billion. Looking ahead, Gallagher Re projects an approximate 8% increase in traditional reinsurance capital for the full year 2025, translating to an additional $57 billion. This revised forecast, up from an earlier 6% prediction, is a direct consequence of buoyant financial markets and favorable foreign exchange movements observed during the initial six months of 2025.
Furthermore, data from Artemis indicates a dynamic period for the catastrophe bond market, which saw a remarkable 15% growth in the first half of the year alone. Despite approximately $5.9 billion in maturities during the second quarter of 2025, strong issuance, totaling $10.5 billion, propelled the outstanding catastrophe bond market size to a new record of $56.7 billion. This impressive expansion, with the market being 15% larger by June 30, 2025, despite $10.3 billion in maturities in H1, suggests that Gallagher Re's $4 billion estimate for ILS capital growth might be conservative.
Michael van Wegen, Head of Client & Market Insights International at Gallagher Re Global Strategic Advisory, emphasized the favorable position of global reinsurers for maintaining strong profitability throughout 2025. He anticipates an underlying ROE between 13-14% and a headline ROE of approximately 17-18% for the full year, assuming typical catastrophe losses in the latter half. These projections significantly exceed the industry's cost of capital, further supporting the expected 8% rise in traditional reinsurance capital.
The confluence of these factors paints a compelling picture of a reinsurance market in a period of considerable strength and expansion. Both traditional and alternative capital streams are contributing to a robust financial environment, enabling the industry to absorb risks and pursue growth opportunities with confidence. This positive momentum is underpinned by strategic capital management and a responsive approach to market conditions.
