Reinsurers achieved an average return on equity (ROE) of 17% in 2025, marking a third straight year of strong underwriting results and retained earnings, supported by solid investment performance, according to Aon’s April renewal report.
With this in mind, the firm has anticipated reinsurers to continue generating returns above their cost of capital in 2026, provided ceded losses remain within expected levels.
However, rising geopolitical tensions, including the Middle East conflict, and capital market volatility could increase uncertainty across the global economy.
Elsewhere in the new report, Aon noted that global demand for reinsurance increased by approximately 10% at the April 1 renewal, as buyers used favourable market conditions to secure more comprehensive protection, with some expected to return to the market post-renewal to explore additional purchases.
In certain Asia Pacific markets, rate reductions of up to 20% reportedly underscored the strength of buyer leverage supported by abundant capacity.
Aon continued, “In key Asia Pacific markets – including Japan, Korea and India – reinsurance buyers secured double-digit rate reductions, supported by plentiful capacity and a period of relatively benign catastrophe losses.
“In the U.S., competition across traditional and insurance-linked securities markets responded to increased buyer demand and led to double-digit pricing reductions. U.S. insurers also used favourable buyer conditions to transfer more risk to reinsurers through increased limits, frequency covers and proportional transactions.”
Global reinsurance capital reached a record $785 billion at April 1, which, according to Aon, enabled significant risk-adjusted rate reductions for its insurer clients at the renewal, extending the favourable momentum seen during the January 1 reinsurance renewal period.
“A sharp increase in alternative capital also expanded balance sheets and intensified competition, driving buyer leverage,” the firm added.
Aon’s report went on, “Competition was particularly strong in property lines and lower layers of reinsurance programs, as reinsurers and insurance-linked securities investors actively deployed capacity in pursuit of growth.
“The favourable buying dynamics translated into improved pricing, broader coverage options and more flexible program structures, while higher commissions on proportional placements, expanded limits and extended catastrophe towers enabled insurers to enhance protection value while reducing overall program cost.”
George Attard, chief strategy officer and global head of analytics for Aon’s Reinsurance Solutions, commented, “Taking a proactive, strategic approach to using reinsurance capital as an enabler allows our insurer clients to embrace risk and drive profitable growth ambitions through 2026 and beyond.
“In this environment, reinsurance provides insurers with powerful tools to manage volatility, protect profitability and invest confidently in new lines of business, geographies and emerging risks, as well as pursuing inorganic growth opportunities – a key trend highlighted in our report. Such actions will help insurers outperform peers as the market cycle evolves.”
Steve Hofmann, Americas CEO for Aon’s Reinsurance Solutions, added, “The combination of strong capitalisation and disciplined underwriting provides confidence that current pricing levels remain sustainable, allowing buyers to benefit from improved protection today without undermining longer-term market stability.”
Looking ahead, Aon observed that pressure on rate reductions in primary pricing is expected to increase over the next 12–18 months, placing greater emphasis on capital efficiency and disciplined growth.
Alfonso Valera, International CEO for Aon’s Reinsurance Solutions, concluded, “As volatility increases and primary market competition intensifies, insurers are increasingly using reinsurance as a strategic tool rather than a purely transactional purchase.
“Buyers are exploring a broader mix of solutions – including facultative reinsurance, portfolio facilities, proportional covers and multi-year arrangements – to smooth earnings, lower cost of capital and support long-term planning.”
