Traditional firms used 77% of available funds.
Global dedicated reinsurance capital reached a record $663b at the end of 2025, up from $607b a year earlier, as traditional reinsurers and third-party investors continued to add capital whilst the amount needed to support industry risks remained broadly stable.
AM Best said the gap between available and required capital had strengthened reinsurers’ financial buffers.
Traditional reinsurers’ capital utilisation fell to 77% in 2025 from 85% in 2024, mainly because available capital grew whilst required capital remained relatively flat.
“The improvement in capital utilisation does not reflect a material reduction in the risks being assumed by the industry,” the report said. Instead, reinsurers had accumulated capital whilst remaining broadly conservative in deploying it.
Traditional reinsurance capital increased to $540b from $500b in 2024.
Reinsurers in the US and Europe accounted for 73% of dedicated reinsurance capital, whilst Bermuda’s share rose to 16% from 15%.
The five largest companies accounted for 54.2% of the market’s capital, down from 55.8% a year earlier and the lowest combined share since 2018.
Capital growth was supported by strong underwriting and investment earnings.
Reinsurers benefited from favourable margins, disciplined terms and investment income from fixed-income portfolios.
Much of the increase came through retained earnings rather than the formation of new reinsurers.
Third-party capital also reached a record, with insurance-linked securities (ILS) capital rising to $123b in 2025 from $107b in 2024.
The increase was supported by investor demand for catastrophe bonds and other insurance-linked securities.
Despite the increase in available capital, catastrophe probable maximum loss exposure remained broadly stable in 2025.
Catastrophe risk budgets, measured against available capital, continued to decline, giving reinsurers more room to absorb losses or take on additional underwriting.
The report said “capital has accumulated faster than the underlying risks being supported by the industry”.
It said this would leave reinsurers facing decisions over whether to expand their portfolios, invest in primary and specialty insurance, pursue acquisitions, return capital to shareholders or maintain larger buffers.
The trend differs across markets.
The catastrophe risk budget of the European Big Four has fallen by about nine percentage points since 2022, whilst the US and Bermuda market has increased its risk budget by about 2.5 percentage points.
AM Best expects capital utilisation to improve further to 72% in 2026. It also forecasts reinsurance market growth of about 6.3%, slightly below the previous year, although the outlook could change depending on hurricane activity and geopolitical developments.
“The next phase of the market cycle may therefore be defined less by the availability of capital and more by how effectively reinsurers deploy it,” the report said.
It added that competitive pressures could increase if demand for reinsurance capacity and underlying risk exposure fail to grow at a similar pace.
