Soft market growth should not be labelled as ‘inherently bad’ – Gallagher Re

With reinsurance rate growth continuing to falter in the face of softer market conditions, reinsurers are having to rely on other tools within their arsenal to secure “profitable growth”.

The industry “should be careful about framing growth in a softening market as inherently bad” because there is still “strong rate adequacy across many lines”, according to William Thompson, head of global clients and managing director at Gallagher Re.

Addressing trade press during a media briefing at the reinsurance broker’s London office on 2 September 2025, Thompson conceded that there had been rate weakening across Europe in both personal and commercial lines during the first six months of 2025.

Capital had drifted away from “large corporate risk” to instead focus on mid-market business, he suggested.

Rates are additionally decreasing for global specialty risks, he noted, where “insurers show very strong appetite for this business”.

He explained: “The primary market is now rapidly transitioning from the hard market conditions of the past few years to something more moderated.

“Strong rate adequacy across many lines, resilient balance sheets and the availability of more compelling reinsurance solutions will lead to increased competition and elevated pricing pressure.

“In the next phase of the market cycle, the challenge for insurers will be how to deliver on growth targets in a softening rate environment. In H1, we have seen for our global clients that revenue growth slowed by 4% from 7.3% a year ago. This is driven by a slowdown in rate momentum and limited volume growth.”

Tom Wakefield, chief executive at Gallagher Re, agreed with Thompson’s assessment.

He commented that the reinsurance market was currently experiencing its slowest revenue growth since 2017 – at around 3%.

He added: “The search for profitable growth is paramount at this stage in the cycle and effective cycle management is going to be critical to perform well.”

Removing rates as growth metric

With rates proving to be an unreliable growth lever during the soft market cycle, Gallagher Re’s experts pinpointed a number of other tools that reinsurers are going to need to deploy if they want to achieve growth in 2025’s second half.

Wakefield observed that growth in the reinsurance market will need to steer away from rates and instead focus on margins and risk exposure, with acquisitions and share buybacks offering options.

Thompson added: “It is important to note that while rate change is clearly an important key performance indicator, so too is rate adequacy and we should not lose sight of where we are in the cycle.

“In recent years for some lines of business, rate adequacy has been as favourable as it has been at any point in the last 20 years. So, we should be careful about framing growth in a softening market as inherently bad.

“With tailwinds from rate increases fading and the benefits from higher interest rates increasingly reflected in earnings, earnings growth is likely to be increasingly dependent on volume growth.”

The reinsurance sector has demonstrated at least two years of solid returns, with Wakefield telling attendees that reinsurance loss ratios were manageable in 2025’s first half – despite significant natural catastrophe losses in the early part of the year, such as $69.5bn (£51.5bn) of insured losses in the US.

He described the market as being robust and well capitalised, with around $805bn of capital in the global marketplace.

Status quo

Gallagher Re’s panel – which also included president Andrew Newman, chief commercial officer Lara Mowery and Princethan Sothinathan, chief executive of data analytics – agreed that growth strategies are coming under closer scrutiny than ever before as price fails to have the same impact.

They emphasised that capital management remains vital.

Thompson added that the broker would work to “push the structures and coverage that provide increased value and represent reinsurer appetite today, rather than appetite from 2023, to help our clients deliver their strategic goals.”