Record levels of global reinsurance capital are driving a more competitive market, with falling prices and more alternative capital expected to keep reshaping the industry, according to a new report by Aon.

In its Reinsurance Market Dynamics report on the April 2026 renewals, Aon said: “Record levels of industry capital, aggressive competition from [insurance-linked securities] markets and relatively benign catastrophe losses … helped drive double-digit reductions and more flexible terms and conditions at April 1.”

The report found that global reinsurance capital reached a record $785 billion, supported by a sharp increase in third-party capital, including catastrophe bonds and sidecars. Alternative capital rose to $136 billion, with Bermuda having played a key role in that expansion, particularly in the growth of sidecars and ILS structures.

The report said: “In all cases, the Lloyd’s and Bermuda marketplaces have supported a variety of strategies and facilitated growth of the sidecar market through novel structures.”

However, the surge in available capital is now contributing to a softer market, Aon said, with double-digit price reductions in some areas at recent renewals.

The report said insurers are taking advantage of these better conditions by buying more cover and reducing the amount of risk they keep, locking in protection at lower prices. They also took the opportunity to purchase higher limits, as well as extend their catastrophe towers. This all led to an increase of close to 10 per cent for demand for the April renewals.

While reinsurers have recently reported strong returns, the shift towards increased competition is expected to put pressure on margins over the next 12 to 18 months.

At the same time, Aon pointed to the potential for increased merger and acquisition activity, as firms look to deploy excess capital and maintain scale in a more competitive environment.