Global reinsurance costs decreasing at mid-year renewals: Guy Carpenter

Despite global insured losses reaching $70 billion during the first half of 2025 — including $40 billion in losses from the California wildfires in the first quarter — global reinsurers are reporting an 8.1% decrease in the cost of reinsurance following the April and mid-year renewals.

“Insured loss activity in the second quarter levelled off from the elevated first quarter,” global reinsurer Guy Carpenter reported July 10. “Losses for the first half of 2025 are now flat compared to the inflation-adjusted five-year average.

“The Los Angeles wildfires account for $40 billion in insured losses or 59% of activity in the first half of 2025. For reinsurers, the California wildfire losses are not expected to impair capital or appetite for the remainder of the year.”

That’s music to the ears of Canadian property and casualty insurers, who dealt with $9-billion worth of catastrophe losses in 2024 — a national record by far.

In the past, Canadian reinsurance brokers have noted the country’s reinsurance market can be influenced by global loss trends, even though loss trends in this country do not follow the same path as in the United States.

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For example, in 2023, Canadian P&C insurers paid out about $3.5 billion in natural catastrophe claims, as Aon reported. And yet, Canada witnessed a significant ‘correction’ in reinsurance premiums and capacity. Reinsurance premiums soared, while primary insurers retained more risk on their own balance sheets.

Thus far, Canadian P&C insurance industry sources have said they do not expect to see a similar reinsurance market contraction. “We picked a good time to have a bad year,” as one industry source told Canadian Underwriter in June.

Guy Carpenter’s report, published July 10, appears to bear that out. The report measures the cost of reinsurance using the metric of rate-on-line (ROL), which shows premium as a percentage of policy limit. For example, if a reinsurance contract covers $20 million in liabilities and the premium is $4 million, the ROL is 20%.

Globally, ROL decreased 8.1%. The United States saw a 6.7% decrease, while Asia-Pacific countries such as China, India, Japan, Australia, Indonesia, saw ROL decreases of 15.9%.

“The current trading environment is one of the most favorable for reinsurers in many years, evidenced by the additional capital being attracted to the sector,” Dean Klisura, president and CEO of Guy Carpenter, says in the report.

“We see this as a tremendous opportunity to re-balance the market dynamics in our clients’ favor. More capacity will continue to moderate pricing, give clients more diversification of reinsurance partners, and provide better solutions to protect earnings.”

Reinsurer returns on equity were 16% in 2024 and are projected to be 15% in 2025. Reinsurance capital closed 2024 at an all-time high of $607 billion.

“Guy Carpenter expects a continuation of this trend, with capital growth of 5% to 7% by year-end 2025,” the report states.

“Reinsurers easily absorbed the 5% to 7% increase in client demand for property catastrophe limit. Moreover, reinsurer capacity exceeded demand by more than 20%, driving risk-adjusted rate decreases of 5% to 15% for non-loss impacted programs, and risk-adjusted rate increases of 10% to 20% for loss-impacted programs.”