The London reinsurance market has witnessed a pronounced softening in premiums across multiple lines of business ahead of the 1 January 2026 renewals, driven by expanding capital and historically low natural catastrophe losses. This assessment was published in a report by Guy Carpenter, the reinsurance division of Marsh.
The report categorises the current market as “softening,” citing abundant capital, exceptionally low catastrophe losses over the past decade, and sustained high returns for reinsurers as the principal drivers behind this trend.
Strong Returns and Growing Capital
Guy Carpenter’s analysis highlights that reinsurers are expected to deliver robust returns once again in 2025. Return on Equity (ROE) figures illustrate a resilient performance trajectory:
| Indicator | 2023 | 2024 | 2025 (Estimated) |
|---|---|---|---|
| Return on Equity (ROE) | 21.9% | 16.4% | 17.6% |
| Reinsurance Capital Growth | 7% | 7% | 9% |
| Insured Natural Catastrophe Losses (US$ bn) | 150 | 148 | 121 |
| Catastrophe Rate on Line (ROL) Change | ↓ | ↓ | ↓ Double-digit |
The report notes that the projected 2025 ROE of 17.6% remains well above the average cost of capital of 8.6%, marking the third consecutive year of strong outperformance. Reinsurance capital is expected to increase by 9% in 2025, following 7% growth in both 2023 and 2024. This expansion has been supported by sound underwriting profits, retained earnings, asset recoveries, and continued investor interest in alternative capital solutions such as catastrophe bonds.
Insured natural catastrophe losses are estimated at $121 billion in 2025, 18% below the five-year inflation-adjusted average. Elevated attachment points and excess capital have created a competitive premium environment, benefiting clients across multiple lines.
Market Developments by Segment
Property: Demand for catastrophe coverage has risen 5–10%, met through a combination of traditional and alternative solutions, including aggregate quota share arrangements, cat bonds, and parametric products.
Cyber: The market has increasingly focused on hybrid and event-specific contracts, with non-proportional coverage seeing premiums fall 2.5–25% alongside improved terms.
Casualty: Renewal outcomes vary regionally. Overall, rates have remained stable, with proportional structures providing advantages in certain portfolios. Notably, casualty positions have been traded alongside property portfolios in the U.S., reflecting litigation cost pressures.
Role of Alternative Capital
Investor interest in insurance-linked securities (ILS) has further reinforced the softening trend in property lines. Total issuance of property and cyber catastrophe bonds in 2025 exceeded $58 billion, including 15 new sponsors entering the market for the first time.
Guy Carpenter concludes that the combination of surplus capital, profitable underwriting, and disciplined cedent behaviour continues to underpin the softening in the reinsurance market, supporting stability and sustainability as the sector enters 2026.