After four years of failing to meet their cost of capital, global reinsurers have now achieved that benchmark for the second straight year, driven in part by strong market performance,according to a new AM Best report
The Best's Market Segment Report, "Reinsurers Meet Cost of Capital for Second Consecutive Year," is part of AM Best's look at the global reinsurance industry ahead of the Rendez-Vous de Septembre in Monte Carlo. Other reports, including AM Best's ranking of the top global reinsurance groups and in-depth looks at the insurance-linked securities, Lloyd's, life/annuity, health and regional reinsurance markets, will be available during August and September.
According to this report, the reinsurance industry's weighted average cost of capital has been volatile over the past decade, and dipped again to 7.66% in 2024, down from 8.1% in 2023. It fell further in the first quarter of 2025, to 6.66%. Several factors helped subdue the cyclical nature of the reinsurance market, including sound risk management, strategic use of technology and the global reinsurance sector's maturing partnership with alternative capital.
"The current hard market conditions in the reinsurance segment are being driven primarily by the memories of historical prolonged underperformance, compounded by the abundant capital due to the extended low interest rate environment," said Helen Andersen, industry analyst, AM Best.
Reinsurance rates skyrocketed in 2023, but increases are slowing. Guy Carpenter calculated a 6.2% decrease in rate-on-line at Jan. 1, 2025, for both U.S. and European property catastrophe reinsurers, after a moderate increase of 5.4% in 2024, compared with nearly 30% in 2023. However, there was some differentiation in 2025 renewals, as some loss-affected reinsurers saw steep price increases.
"Reinsurers have also implemented thorough derisking measures, such as tightened terms and conditions and a sharp increase in attachment points, which are unlikely to be loosened," said Sridhar Manyem, senior director, industry research and analytics, AM Best.
To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=357130.
For global reinsurance reports ahead of Rendez-Vous de Septembre, as well as video coverage of the event, please visit AM Best's Reinsurance Information center.
Lastly, AM Best will host its annual reinsurance market briefing at Rendez-Vous de Septembre on Sept. 7, 2025, at 10:15 a.m. (CEST) in Monte Carlo. For more information, please visit the event website.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com
Copyright 2025 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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Contacts:
Helen Andersen
Industry Analyst, Industry Research
and Analytics
+1 908 882 2388
helen.andersen@ambest.com
Sridhar Manyem
Senior Director, Industry
Research and Analytics
+1 908 882 2087
sridhar.manyem@ambest.com
Christopher Sharkey
Associate Director, Public Relations
+1 908 882 2310
christopher.sharkey@ambest.com
Al Slavin
Senior Public Relations Specialist
+1 908 882 2318
al.slavin@ambest.com
