The reinsurance market is entering a phase of ‘hard market softening’, but the shift is occurring from a position of historical pricing strength. Rates have eased from recent peaks, but remain well above the troughs of the 2010s, says Howden Re in a report titled “Who dares wins: Innovation in an era of hard market softening”.
Elevated natural catastrophe loss activity has become structural, with every year this decade exceeding US$100bn in insured losses, largely driven by what used to be termed ‘secondary’ perils.
Against this backdrop, capital has recovered from 2022 impairments, with investors favouring disciplined deployment over rapid expansion. Yet, capacity remains cautious and concentrated. Property-catastrophe rates-on-line are moderating as supply improves. Loss activity, particularly from so-called secondary perils, continues to exceed historical norms, reshaping portfolio risk and driving regulatory focus on concentration and climate-sensitive exposures.
Profitability
Cedent profitability has improved under these conditions, yet margins remain thin.
Profitability will increasingly depend on aligning retention levels, coverage structures and capital deployment, with both earnings stability and regulatory efficiency. Carriers continue to absorb most losses, retaining 62% of all historical modelled Nat CAT exposure at 1 January 2025. Despite easing from 67% in 2023, retentions remain elevated, demanding disciplined underwriting, robust capital management and creative risk-transfer solutions.
The report said, “This is a market in which both cedents and reinsurers can win if they dare. Reinsurers can do so by deploying capacity selectively; cedents have scope to regain some of the coverage relinquished during the hardest recent renewals. Collaboration and innovation will be central to capturing the opportunity and sustaining resilience in the next phase.”
Re-tooling
The report added, “The toolkit must now extend beyond traditional programmes to include aggregate covers, parametric triggers, multi-line structures, as well as capital markets instruments that can be tailored to address specific volatility drivers such as wildfire, severe convective storm and flood. Concentration management, informed by improved analytics, is becoming an indispensable complement to conventional modelling, particularly where model limitations persist.
“In short, the cycle has turned and opportunity beckons. Those who dare to win – combining market insight with technical execution, selectively expanding exposure, diversifying across geographies and perils and deploying innovative structures where they deliver measurable value – will be best placed to sustain returns, close protection gaps and strengthen resilience through the next phase of the market,” the report added. M