Howden Re warns insurers to strengthen reinsurance protection as cycle softens

Insurers should use the current stage of the underwriting cycle to strengthen reinsurance protection and reduce earnings volatility before the next major loss event, according to analysis from Howden Re.

The reinsurance broker’s report suggested the buyer’s market facing cedents at recent renewals, particularly on 1 January, favours increasing reinsurance protection.

“Across the January renewals and into 2026, we are seeing competition intensify in many segments,” said Tim Ronda, CEO of Howden Re.

“Strong recent results should not obscure the fact that the underlying risk environment still contains inherent volatility. Insurers that use this cycle transition to recalibrate their risk appetite, optimise reinsurance structures and reinforce capital resilience will be far better positioned when the next event occurs.”

The broker’s report highlights a shift in market dynamics following two years of strong underwriting performance and improving balance sheets across the global insurance sector.

While reinsurers remain well capitalised and capacity is broadly available, competition has increased in several areas, particularly where recent catastrophe loss experience has been limited.

This softening in primary rates is occurring against a backdrop of structurally higher catastrophe risk, driven by factors including climate volatility, increased asset values and the growing complexity of global exposures.

According to the report, this combination means insurers face greater potential earnings volatility if catastrophe losses rise while margins narrow.

Howden Re said carriers therefore have an opportunity to review the structure of their reinsurance programmes while market conditions remain favourable.

Buyers that adjust programmes early in the cycle can often secure improved terms and greater protection before market sentiment shifts.

The report also notes that reinsurers continue to show discipline in their deployment of capital, with underwriting quality and portfolio diversification remaining key drivers of capacity allocation.

At the same time, the industry’s strong recent financial results have encouraged some insurers to retain more risk on balance sheet, a strategy that could increase earnings volatility if catastrophe losses accelerate.

Kyle Menendez, managing director at Howden Re, said reassessing catastrophe protection should therefore be a priority as market conditions evolve.

“Reassessing volatility protection is critical as the cycle turns,” Menendez said.

“Catastrophe pressures have structurally increased as primary rates have softened. Carriers have a clear opportunity to strengthen reinsurance programmes before severe losses test thinner margins. Those that move early in what remains a buyers’ market can reduce earnings volatility and support disciplined growth,” he added.