The reinsurance sector has rebounded since 2023 with stronger pricing and disciplined underwriting, helping companies generate solid profits and grow capital.As of mid-2025, the market remains stable, though there are early signs of modest softening at the highest layers of property reinsurance, according to AM Best.Moreover, while the reinsurance sector has not seen a wave of new start-ups entering the space, capital has returned through more measured and strategic channels.“As of mid-year 2025, the property reinsurance market remains stable with signs of modest softening emerging at the highest layers of attachment.

Reinsurers have remained diligent on attachment points and terms throughout the rate softening, which is believed to be the main factor driving their continued success,” AM Best said in a new report.The rating agency also stated that it expects the reinsurance market will continue to thrive throughout 2025, feeling that while it is softer the market remains a profitable one.However, while reinvestment yield might marginally decrease, the market should again be able to generate returns on equity by year-end 2025 in the low-to-mid teens.

Capital growth could always be dampened by dividends, as well as a highly active 2025 hurricane season.Despite the uncertainty regarding the remainder of the 2025 hurricane season, AM Best stated that the reinsurance market remains “well positioned to absorb a reasonable level of losses and still grow capital.” “As we approach the height of the US hurricane season, which always brings the potential for outsized losses, the results may affect not just the reinsurance market, but also the insurance market as a whole,” the agency noted.Adding: “Severe convective storms and large cat events have stressed both cedents and reinsurers over the last year.

The market, however, has been resilient despite the impact of the California wildfires eroding cat budgets and creating uncertainties about the loss costs.The resilience of reinsurers can be mainly attributed to the accumulation of retained earnings and strong investment yields, which have established solid capital buffers.” AM Best and reinsurance broker Guy Carpenter previously reported that  Recent estimates from both firms suggest that The ILS market has experienced significant growth throughout 2025, with AM Best citing that 144A catastrophe bond issuances reached record-breaking levels at $16.7 billion, through June 30, 2025.However, in Artemis’ Q2’25 catastrophe bond and ILS report, a full-year record set in just the first six months of 2025, beating 2024’s full-year total by $183 million.

This growth is primarily attributable to investors who entered the market during the first half of the year, a period characterised by greater capacity availability.The influx of new sponsors, along with the emergence of larger deal sizes, has been driving this growth and increasing the demand for capacity.Switching attention to reinsurance capital, AM Best noted that dedicated reinsurance capital grew to US  $500 billion at year-end 2024, largely thanks to strong underwriting results, retained earnings, and higher investment yields.

“While a wave of new startup reinsurers entering the market has not emerged, established reinsurers have strengthened their capital bases via secondary equity offerings, as well as through disciplined retention of earnings while a surge in investor appetite for catastrophe bonds has bolstered third party capital growth.Together, these sources of capital have enhanced the market’s overall financial resilience and its capacity for growth,” AM Best explained.Antonietta Iachetta, associate director, AM Best, commented: “Reinsurers continue to transition toward more diversified and balanced business models, including a growing allocation to primary and specialty insurance lines, reflecting a deliberate move away from purely relying on property catastrophe risk.

“This structural shift supports earnings stability and more agile capital deployment, as well as the amount of capital deployed in the traditional reinsurance market, even with significant catastrophic activity.” Dan Hofmeister, associate director, AM Best, said: “Assuming a more normal level of catastrophic events, reinsurers are on pace to report upper-single-digit capital growth in 2025.Volatility in asset risk and potentially higher reserve charges from continued social inflation could create some negative pressure, but reinsurers are well-positioned to absorb a normal level of volatility in the market.”.All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance can be accessed online.

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