Record levels of capital and more competition are likely to drive a new phase of consolidation in the global reinsurance market, with pressure expected to fall most heavily on smaller and private-equity-owned firms, according to Aon.

In its Reinsurance Market Dynamics: January 2026 Renewal Report, Aon said more consolidation is a “predictable consequence” of present conditions, as reinsurers contend with excess capacity, softening pricing, and more and more third-party capital.

Global reinsurance capital reached a record $760 billion by the end of September 2025, thanks to strong retained earnings and the inflows of alternative capital.

Aon said the weight of capital is sharpening the focus for reinsurers, encouraging mergers and acquisitions as a way to scale, diversify their portfolios and stay competitive in a buyers’ market.

The report noted that consolidation is likely to be seen mostly at the smaller end of the market, especially where there is longstanding private equity ownership.

While no specific transactions were identified, Aon pointed to the growing influence of alternative capital as a reshaping force. Third-party capital reached an estimated $124 billion, by the broker’s estimates, with $59 billion of catastrophe bonds outstanding and continued growth in sidecar structures across property and casualty lines.

“Traditional reinsurance capital is at very strong levels and growing,” the report read. “Despite ongoing geopolitical and macroeconomic uncertainty, this weight of capital is expected to increase competition and create greater impetus for reinsurers to pursue strategic M&A as a positive lever.”

For Bermuda, the report’s findings carry particular resonance. Bermuda’s insurance and reinsurance sector is attracting record private capital flows, with the island’s private credit market reaching roughly $135 billion, including about $40 billion between 2020 and 2022. This private capital is entering in part through sidecars, helping to add capacity and narrow protection gaps.

In recent years, large asset managers such as Blackstone and Brookfield have also deepened their involvement in the Bermuda reinsurance industry.