Howden Re Report Examines Innovation in a Hard Market Softening Cycle

Howden Re has released its report Who Dares Wins: Innovation in an Era of Hard Market Softening, which analyzes how reinsurers and cedents can navigate the evolving market landscape. According to Howden Re, those who combine market insight, technical execution, portfolio diversification, and innovative structures will be best positioned to succeed in this next phase of the cycle. 

Following a period of rate hardening that began in 2022–2023, the report notes the reinsurance market is now entering a phase of "hard market softening," with rates easing but remaining elevated amid structurally higher risk premiums. Per the report, carrier profitability has improved as returns have generally exceeded the cost of capital, though cedents remain heavily exposed to natural catastrophe (natcat) losses, retaining 62 percent of all modeled natcat exposure as of January 1, 2025. 

According to the report, this transition is occurring amid global volatility, including the lingering effects of COVID-19, geopolitical conflict, cyberattacks, political violence, inflation, and higher interest rates. Approximately $35 billion in new capital has entered the sector since 2022, representing only 7 percent of total dedicated reinsurance capital—far less than in prior cycles. Most of this new investment has come through insurance-linked securities, while start-ups have been limited. 

Casualty lines continue to face pressure from litigation and social inflation, particularly in US general liability, commercial auto, and liability reinsurance, per Howden Re. However, improvements in workers compensation and medical malpractice have enabled insurers to report net calendar-year reserve redundancies, resulting in a longer and shallower reserving cycle than during the early 2000s liability crisis. 

The report emphasizes that innovation and adaptability are essential. Per Howden Re, exposures once considered "secondary" perils—such as severe convective storms, floods, and wildfires—are now driving annual insured losses exceeding $100 billion since 2020. Opportunities for innovation include cyber, renewables, managing general agents, and emerging markets, though maintaining profitability will increasingly depend on creative underwriting rather than pricing momentum. 

According to the report, disciplined value creation will define the next phase of the cycle. While softening provides temporary relief to cedents following years of rate increases, Howden Re highlights the importance of focusing on high-impact adjustments—such as retention levels, aggregate protection, and rebalancing reinsurance expenditure—to achieve meaningful results in renewals. The report also notes that data quality, transparency, and engagement are becoming key differentiators in renewal negotiations. 

The report concludes that the reinsurance cycle has evolved from a position of historic opportunity. Capital levels have recovered since the 2022 impairments, but capacity remains cautious. Per Howden Re, cedents should expand their risk management toolkit beyond traditional programs to include aggregate covers, parametric triggers, multi-line structures, and capital markets instruments designed to address new sources of volatility. Concentration management, supported by improved analytics, is described as indispensable given the current limitations of catastrophe models.