Howden: Reinsurance Pricing Drops Sharply at January 1 Renewals

Most reinsurance lines experienced significant risk-adjusted rate reductions at the January 1 renewals, according to Howden's Re-Balancing. These reductions brought pricing levels in property-catastrophe, retrocession, and direct and facultative (D&F) reinsurance close to those last seen 4 years ago, though terms and structures remained tighter compared to previous soft markets.

Howden reported that risk-adjusted rate-on-line decreases reached 14.7 percent for global property-catastrophe reinsurance, 16.5 percent for property retrocession, and 17.5 percent for D&F reinsurance. Casualty lines in the London market also recorded reductions of 5 to 10 percent. Strong insurer and reinsurer balance sheets supported a high level of deployment, contributing to broad-based softening despite structural risk remaining elevated.

Reinsurers' appetite for growth and ample capital supply were key factors driving market conditions. According to Howden, overall profitability across the (re)insurance value chain remained strong in 2025—even after accounting for the large losses caused by the Los Angeles wildfires—providing momentum for further rate softening.

Property-catastrophe pricing declined globally despite another year of elevated catastrophe activity. In the United States, rate reductions typically ranged from 10 to 20 percent, with France, Italy, Switzerland, and the United Kingdom seeing similar decreases. Germany recorded a more moderate softening of 8 to 11 percent. In the Asia Pacific region, risk-adjusted pricing for loss-free programs fell by 10 to 20 percent, per Howden.

In the retrocession market, risk-adjusted pricing dropped by 12.5 to 21 percent. According to the report, capacity was more than sufficient to meet demand, though pricing outcomes varied significantly by coverage type and attachment level. The most pronounced decreases were seen in higher layers, driven by strong insurance-linked securities fund participation.

D&F reinsurance experienced accelerated softening, with average rate reductions of 15 to 20 percent. Terms evolved modestly, including a broader willingness among reinsurers to offer lower-level participation. Even with competitive pressure, many cedents opted to maintain existing retentions to capture savings, Howden said.

Casualty reinsurance conditions also improved, with international programs recording widespread rate reductions amid stable claims and expanding capacity. Risk-adjusted reductions of 5 to 10 percent were typical for London market excess of loss programs. According to the report, buyers benefited from continued strong performance and the absence of major deterioration in claims experience.

Specialty lines generally followed the broader softening trend, with favorable outcomes for cedents in credit and political risk, construction, cyber, marine, and energy. Aviation was a notable exception, where conditions firmed slightly after a series of losses in 2025.

Looking ahead, Howden expects favorable market conditions to persist, supported by strong capitalization and reinsurers' continued focus on defending market share. However, the report cautions that the market remains sensitive to losses, volatility, and rising capital costs.