Howden Re releases Who dares wins: Innovation in an era of hard market softening

London, 5 September 2025 –  Howden Re, the global reinsurance, capital markets and strategic advisory arm of Howden, has released Who dares wins: Innovation in an era of hard market softening. The report concludes 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 cycle.

Industry context 

Following the recent rate hardening phase that began in 2022–2023, the reinsurance market now faces a period of ‘hard market softening’, in which rates, whilst easing, remain elevated amidst structurally higher risk premia. 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.

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 2020s have simultaneously been defined by turbulence and interconnected crises, from the lingering effects of COVID-19 to geopolitical conflict, cyberattacks, political violence and natural catastrophe activity. These pressures, combined with inflation and higher interest rates, have reshaped profitability dynamics and present challenges for new capital deployment.

Since 2022, approximately US $35 billion of new capital has entered the sector, equal to around 7% of total dedicated reinsurance capital compared with 15-17% in prior cycles. Inflows are heavily concentrated in insurance-linked securities, whilst start-ups have been rare, reflecting investor caution and a preference for disciplined deployment.

Casualty lines continue to face pressure from litigation and social inflation, particularly in US general, commercial auto and reinsurance liability, although offsets in workers’ compensation and medical malpractice have enabled carriers to report net calendar year reserve redundancies. This reserving cycle is now longer and shallower than the liability crisis of the early 2000s.

Key findings 

Those who innovate and adapt will thrive: Exposures previously described as ‘secondary’ perils such as severe convective storms, floods and wildfires are no longer secondary. Casualty lines remain challenging, yet economic profit remains achievable for reinsurers willing to innovate and take calculated risks. Emerging opportunities include cyber, renewables, MGAs and growth in emerging markets. However, in this hard market softening phase, top-line expansion can no longer rely mainly on pricing momentum; underwriters must innovate in order to maintain profitable growth.

A nat-cat state of mind: Since 2020, natural catastrophe losses have exceeded US $100 billion annually, constraining capacity, eroding margins and prompting caution towards frequency-driven exposures. Yet, history shows that careful risk selection can still deliver favourable results in periods of elevated loss activity. In particular, allocation to well-performing international markets can sustain high-return portfolios, whilst delivering diversification benefits from uncorrelated exposures. Resilience in this environment requires careful consideration of long-term data trends, thorough portfolio concentration assessment and enhanced analytics. 

Disciplined value creation: 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.

Outlook 

The report concludes that 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 said, “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, Howden Re commented, “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.”