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Reinsurance dedicated capital increased 11% to a record $648 billion in 2025, although profitability waned as reinsurance markets softened.
This included $513 million in traditional capital and $135 million in alternative capital, both respective highs, according to a report Tuesday from Gallagher Re.
Retained earnings and “strong” alternative capital inflows were the main drivers of the increase, the report said.
Nonlife alternative capital increased by 18% in 2025, the largest annual growth rate observed to date. Net inflows also backed a broader range of lines of business, including casualty, Gallagher Re said.
Forecast for traditional capital growth is 4% in 2026, below the 10-year average of 6%.
Reinsurers face a lower return on equity going forward as rates soften as a function of the strong capital position.
Renewal rates for property catastrophe reinsurance are down by double-digit percentages but more broadly declines are less severe, with “overall portfolio rates” estimated to be down by mid-single–digit percentages year-to-date, Gallagher Re said.
Revenue growth “materially” slowed in 2025 as a result of the softening market, from 9.7% in 2024 to just 1.2% in 2025 for the composite of companies analyzed by the report, “driven by a softening market in property and specialty lines while rates remained broadly flat in casualty,” Gallagher Re said.
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