A More Disciplined Cycle Emerges
The reinsurance market has always been defined by cycles—hard markets followed by soft markets, with volatility shaped by capital flows and catastrophic losses. But the cycle itself is changing. Today, reinsurers are demonstrating that disciplined risk management, strategic use of technology, and the integration of alternative capital can soften volatility and deliver sustainable performance across conditions.

For the second year in a row, reinsurers exceeded their cost of capital in 2024. This is not a coincidence—it is the outcome of a deliberate, long-term approach to underwriting discipline, portfolio optimization, and the strategic alignment of balance-sheet and third-party capital.

The message is clear: the industry is not just reacting to the cycle—it is actively reshaping it.

Beating the Cost of Capital: A Strategic Imperative
The ability to outperform cost of capital is the ultimate test of reinsurance strategy. In 2024, the industry’s weighted average cost of capital dipped to 7.66%, down from 8.1% in 2023, and fell further still in early 2025 to 6.66%.
This decline reflects a more efficient deployment of capital and tighter alignment between risk and return. Even as reinsurance rates softened slightly in 2025, they remain nearly 90% higher than 2017 levels—evidence of sustainable pricing momentum.

For reinsurers, this means one thing: disciplined strategies are working. The cycle may no longer dictate profitability in the way it once did. Instead, reinsurers are proving they can deliver consistent above-cost-of-capital returns by balancing opportunity with restraint.

Alternative Capital: A Core Partner, Not a Competitor
Much has been said about the impact of insurance-linked securities (ILS) and alternative capital on reinsurance pricing. But the real story is more profound.
Rather than destabilizing the market, alternative capital has matured into a core partner for reinsurers, enabling greater efficiency and resilience. By embedding ILS capacity into their underwriting models, reinsurers are unlocking several strategic advantages:

● Underwriting firepower: Expanded capacity to take on risk without overextending balance sheets.

● Portfolio optimization: Flexibility to allocate risks more dynamically across traditional and third-party capital.

● Fee income: Growing revenue streams that now represent a meaningful factor in shareholder value.

● Leverage of balance-sheet capital: Amplifying impact while maintaining capital discipline.

This is not about competition between traditional and alternative models—it is about integration. Reinsurers who treat ILS as a complementary tool are not only strengthening resilience but also lowering their cost of capital, positioning themselves to outperform peers through the cycle.

Technology as a Catalyst for Efficiency
Alongside capital innovation, technology is transforming the reinsurance operating model. Modern analytics, portfolio modeling, and risk-adjustment tools are giving reinsurers sharper insight into exposure management and capital allocation.

The result is a leaner, smarter, and more efficient business model. Technology accelerates underwriting decisions, enhances risk selection, and allows reinsurers to simulate outcomes with greater precision.

When paired with alternative capital, these tools magnify efficiency—helping reinsurers deploy capacity exactly where it is needed while minimizing operational drag.

Discipline in the Face of Market Pressure
Even as market pricing eases from the highs of 2023, reinsurers remain steadfast in maintaining tightened terms and conditions and higher attachment points. These derisking measures are not temporary reactions; they represent a permanent recalibration of the industry’s risk appetite.

The lesson from the last prolonged soft market is clear: sacrificing discipline for growth erodes long-term stability. By contrast, today’s reinsurers are proving that sticking to disciplined strategies ensures resilience even when competitive pressures mount.

This approach ensures that we can continue to meet client promises, even amid heightened catastrophe activity such as wildfires or hurricanes, while protecting shareholders through more predictable returns.

A More Sustainable Marketplace
The combination of disciplined underwriting, alternative capital partnerships, and technology adoption has created a more balanced and sustainable market. The old boom-and-bust cycle is giving way to a more measured environment, where reinsurers can sustain profitability even through softer phases.

For clients, this is good news. Greater efficiency in capital deployment translates to more stable pricing and reliable access to capacity. For reinsurers, it means the ability to withstand shocks and deliver consistent returns on equity without relying solely on favorable cycles.

Divergence Among Reinsurers
While the overall industry is showing resilience, not all reinsurers are equally positioned. Those who fail to integrate alternative capital effectively, lag in technology adoption, or deviate from disciplined risk appetites risk higher volatility in returns—and, ultimately, higher costs of capital.
The future belongs to reinsurers that view cost of capital not as a constraint but as a benchmark for efficiency. Those that align every underwriting and capital decision with this benchmark will lead the industry in profitability and client trust.

Redefining the Cycle
The reinsurance market cycle is no longer the destabilizing force it once was. By combining sound risk management, disciplined underwriting, advanced technology, and strategic partnerships with alternative capital, reinsurers are rewriting the rules of the game.

The path forward is not about chasing short-term pricing gains. It is about building sustainable business models that can deliver consistent, above-cost-of-capital returns regardless of where the cycle turns.
For us, the mandate is clear: efficiency, discipline, and innovation are no longer optional—they are the foundation of long-term leadership.