Reinsurance pricing is set to continue softening without a major shock, but elevated financial and geopolitical risks mean carriers should use current conditions to build resilience, Howden Re has said in a report released by the reinsurance broker ahead of RVS 2026
The reinsurance market would require a severe convergence of underwriting and financial pressures to reverse its current softening trajectory, according to a new report from reinsurance intermediary Howden Re.
“Breaking the glass: building resilience before it is tested” said the market enters the final months of 2026 with abundant capital, strong underwriting performance and falling pricing, but against a considerably less settled external environment.
Howden Re said economic value creation is also becoming more challenging as pricing falls, with the reinsurance sector’s economic value-added spread already close to break-even by mid-year 2026.
David Flandro (pictured), managing director, head of industry analysis and strategic advisory at Howden Re, said: “Today’s reinsurance market presents a paradox. Profitability is strong, capital is abundant and reinsurance pricing continues to soften, but this is not indicative of a less risky world.
“In fact, global risk levels – reflected in higher debt and equity financing costs – are elevated, narrowing carriers’ return above the cost of capital,” Flandro added.
Stress test
Drawing on nearly a century of US P&C underwriting data, Howden Re found previous market dislocations have typically resulted from several pressures converging rather than the scale of an individual loss event.
For example, substantial catastrophe losses in 2011 and 2017 failed to generate corrections comparable with 2005 because low interest rates and abundant capital helped the market absorb them.
By contrast, the 2022 hardening coincided with persistent inflation, sharply rising yields, Russia’s invasion of Ukraine and Hurricane Ian.
Howden Re modelled a stress scenario of what would be required to change today’s trajectory.
Without a major shock, its model produces a 92% combined ratio, an 11% increase in dedicated reinsurance capital to around $560bn and a directional pricing signal of approximately -15%, indicating further easing.
Its severe scenario combines a $200bn insured catastrophe loss year, elevated attritional losses, adverse casualty reserve development and a 300 basis point interest-rate increase.
Under those assumptions, the combined ratio reaches 110%, dedicated capital falls more than 17% from $505bn to $415bn and the pricing signal reverses to approximately +7%.
Reinsurance value
Against elevated debt and equity financing costs, Howden Re argued that falling reinsurance pricing is creating an increasingly attractive source of capital for cedents.
The broker’s analysis shows G20 risk premia have risen sharply while sovereign yields and corporate debt costs remain elevated, contrasting with declining property catastrophe reinsurance pricing.
The broker said buyers should consider lowering retentions, managing accumulated exposures through aggregate covers, diversifying portfolios and securing additional optionality while capacity remains readily available.
For reinsurers, growing capacity and competition place greater emphasis on selective capital deployment as margins above the cost of capital narrow. Howden Re highlighted retrocession, collateralised limit, industry loss warranties, catastrophe bonds and third-party quota shares among the tools available to manage volatility and capital.
Tim Ronda, CEO of Howden Re, said: “As reinsurance pricing softens, clients have greater scope to think strategically about how their programmes support wider business objectives.
“The value of reinsurance extends beyond price to how effectively it manages volatility, protects capital, preserves flexibility and supports growth. Our focus is on helping clients use the options available today to build resilience through every phase of the cycle.”
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