Howden Re: Reinsurance in transition – from cyclical hard market to structural transformation

Following the release of Who dares wins, a Howden Re report examining how carriers can navigate the current period of hard marketing softening, three Howden Re experts discuss its findings and the implications for the European reinsurance market.

How would you best categorise the current market cycle? What has changed from last year?

Sebastian Cook: We are in a phase of hard market softening. Rates have moderated from the 2023 peak but remain well above the 2010s. There is much to consider regarding the global economic and geopolitical risk landscape, but the sector has proven itself to be skilled at navigating these complexities and the capital position remains resilient. Investors have been rewarded with excellent near-term results, enabling reinsurers to pursue growth strategies in the coming renewals. This strong financial foundation, combined with the consistent client need to enhance the economic and strategic value of their reinsurance, is driving a collaborative spirit between clients, brokers and reinsurers that has not been seen in recent years. Cedants are leaning into long-term partnerships and innovative solutions, providing reinsurers with the opportunity to strengthen their relationships and grow their premium at a time when margins remain attractive.

David Flandro: That geopolitical risk Seb alludes to is elevating global risk premia and increasing complexity and capital constraints. The global protection gap remains stubbornly high. The industry’s priority is to strike the right balance between maintaining underwriting discipline while ensuring long-term partnership with clients. Although rates are moderating from 2023 levels, it is important to remember this moderation comes from a position of historically high pricing strength, meaning that economic value can still be achieved in this environment while at the same time enabling cedants with better solutions.

Tobias Andersson: Clients have absorbed higher retentions, driven by tighter terms and a more volatile loss environment. This has increased earnings exposure and placed greater emphasis not just on pricing dynamics but also on what can be done to support clients with structural changes to manage this challenge. Regulatory scrutiny around climate-sensitive exposures is also growing. Now, it is about aligning risk appetite with resilience.

What can be said about the increasing severity of natural catastrophe risk and its market impacts?

DF: As of January 1, 2025, cedants retained approximately 62% of modelled nat cat exposure, underscoring how much risk remains on their balance sheets. The long-term average is 54%. We can no longer distinguish between peak and secondary perils; secondary is now peak. Every year this decade has exceeded $100 billion in insured cat losses. On January 1, 2023, risk-adjusted global property cat rates increased by 37%. Those pricing gains have begun to soften, but higher return hurdles stemming from current interest rate volatility could theoretically provide a floor under rates. In this environment, reinsurance – a form of contingent capital – is highly valued by insurers.

TA: In nat cat, the Nordics, for example, experienced significant weather-related losses in recent years, which stressed claims operations and raised questions around retention strategy. Many cedants are now exploring multiyear, parametric or aggregate covers to protect earnings. Tailored solutions are critical. The response to this evolving risk landscape extends beyond pricing or retention. It is also about how the industry innovates. New models of intermediation and technology-enabled distribution are emerging to fill coverage gaps and access fresh capital.

Where do MGAs and new forms of innovation fit within this evolving market ecosystem?

SC: MGAs are no longer niche but strategic. They play a vital role in helping the market reach underserved risks like flood, cyber and severe convective storm. Combined with advances in analytics and improved data flows, MGAs are delivering underwriting precision and portfolio diversification. In regional markets dominated by mutuals, MGAs also provide a channel for capital-efficient growth.

DF: Innovation today must be practical. With loss distributions shifting and volatility rising, we are seeing growing demand for earnings protection, aggregate solutions, parametric structures and capital markets instruments. These tools help clients manage the structural risks that traditional indemnity models cannot fully address. Ultimately, we think that the MGA wave of the 2020s is structural, not cyclical; there will be a permanent, new base of MGA capacity driven by those with the technology and underwriting acumen to survive this phase of the cycle.

TA: To agree with my colleagues on this, innovation is key to underwriting and equally important in constructively challenging the status quo. One reflection to add on MGAs is that over the last decade or two, we have seen significantly increased complexity in the value chain of running an insurance company. This in itself may provide an advantage for MGAs in running a more specialised operation focused on certain parts of the value chain with typically greater flexibility. I believe this is a factor that goes beyond the market cycle. In other words, it’s structural, not only cyclical.

Looking ahead, what will define success in 2026 and beyond?

SC: We see 2026 as a year of opportunity. Reinsurers are ubiquitously seeking to grow and deploy into smart, sustainable programs. A methodical approach to innovation, well considered commerciality and trusted relationships will be the defining edge.

DF: The cycle has turned but from a position of strength. Reinsurers have restored margins, while cedants have taken on more risk and capital is being deployed selectively. Those who combine market insight, data science and technology with disciplined execution will be best placed to sustain performance, to close protection gaps and to build resilience in the years ahead.

TA: The only thing to add to the answers above in order to reach success would be to underline transparency. Of course, in terms of data and assumptions, but also in terms of a clear and understandable logic to the rationale behind these innovations and changes. This will be key to earning sustainable backing from the market.

Sebastian Cook, deputy CEO, Howden Re International

David Flandro, head of industry analysis & strategic advisory, Howden Re

Tobias Andersson, head of continental Europe, Howden Re