Howden Re, the global reinsurance, capital markets and strategic advisory arm of Howden, has suggested that those who combine market insight with technical execution, portfolio diversification and innovative structures will be best placed to succeed in this next phase of the reinsurance cycle.
“Crucially, this shift is occurring from a position of historical pricing strength, leaving ample pockets of profitability for those prepared to innovate and underwrite selectively,” the firm explained.
Howden Re continued, “Carrier profitability has improved under these conditions, with returns broadly exceeding costs of capital. Cedents nevertheless remain more exposed to nat-cat losses, retaining 62% of all modelled nat-cat exposure at 1 January 2025. Nevertheless, the Los Angeles wildfires in January marked the largest single loss borne by reinsurers since 2011, underscoring a tightly balanced market.”
The firm’s report stated that as the hard market enters a softening phase, top-line growth can no longer depend primarily on pricing momentum. Instead, underwriters will need to innovate to sustain profitable expansion.
Howden Re said that casualty lines remain challenging, but reinsurers willing to innovate and take calculated risks can still generate economic profit, while additional opportunities lie in cyber, renewables, MGAs, and growth across emerging markets.
The firm’s report continued, “Market moderation has brought short-term relief to cedents following the acute pricing pressures of 2022-2023, but the shift from cyclical peak to softer conditions requires careful navigation.
“Renewal outcomes are increasingly shaped by data quality, transparency and engagement across structure and coverage, rather than by price alone.
“Focussing on adjustments with the highest strategic and economic impact, such as retentions, aggregate protection, cost certainty or rebalancing reinsurance expenditure can improve the likelihood of achieving meaningful outcomes in upcoming renewal negotiations.”
Howden Re concluded, “The reinsurance cycle has evolved, but from a position of historic opportunity. Capital levels have recovered since the impairments of 2022, yet capacity remains cautious and concentrated.
“To remain resilient, cedents must expand their toolkit beyond traditional programmes in order to include aggregate covers, parametric triggers, multi-line structures and capital markets instruments tailored to address emerging sources of volatility. Concentration management, supported by improved analytics, is now indispensable as model limitations persist.”
David Flandro, Head of Industry Analysis and Strategic Advisory, commented, “We know from history that the current ‘hard market softening’ phase can be profitable for underwriters who innovate as risk selection comes to the fore.
“This is achieved through superior business intelligence, diversification across geographies and perils, and superior technical execution. As return hurdles rise and rates moderate, economic value will be achieved by those who dare to win.”
Tim Ronda, CEO of Howden Re, said, “Howden Re empowers clients by combining deep reinsurance expertise with capital markets access, strategic advisory and our global MGA platform.
“This breadth allows us to deliver solutions that go beyond traditional broking – enabling clients to unlock new sources of capital and create long-term value. In a market where innovation and precision matter more than ever, our role is to stand alongside clients in pursuing resilience and market leadership.”
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