Geopolitical tensions are starting to feed into reinsurance decisions

Geopolitical tensions are starting to influence reinsurance discussions indirectly through financial markets, inflation and interest rates, according to Tobias Sonndorfer (pictured), chief executive of VIG Re, even as pricing continues to soften in parts of the market.

Speaking ahead of Intelligent Insurer’s Re/Insurance Outlook conference in Zurich, Sonndorfer said the first half of 2026 had been helped by “benign loss activity in Europe,” with below-average nat cat losses visible, at least in VIG Re’s book. But he said the broader risk environment had become more elevated, driven in large part by the geopolitical backdrop.

“We have an elevated risk environment, very much coming from the geopolitical landscape,” he said, citing armed conflict and tensions involving Iran, the US and Israel. 

Rather than focusing only on direct insured losses, Sonndorfer said reinsurers are watching how geopolitical events feed through into the wider economic environment. “The potential implications of it are still difficult to fully assess, but they are clearly a factor that both reinsurers and cedents are monitoring closely,” he said.

“I do see an indirect effect for the industry, specifically through the financial market,” he added, pointing to inflation and rate movements as the key channels through which geopolitical shocks can feed into underwriting and renewal discussions.

He added that the spillover has the potential to affect not only current portfolios, but also the coming renewal season.

Against that backdrop, reinsurers, he said, have to assess not just the portfolio in front of them, but the wider market conditions in which that business is being written. “There is an assessment of an individual portfolio,” he said, “but there is also the environment in which this transaction takes place.”

Sonndorfer said the April 1 renewals saw “a pronounced softening”, particularly in Japan, extending a trend already visible at 1/1. In his view, that creates a tension the market cannot ignore.

“We cannot say that on the one hand side risks are elevated, and it’s not reflected in the reinsurance discussions at all for now.”

“The current environment requires us to remain responsive to market developments,” he cautioned. “It is about combining clear principles with the ability to actively navigate the market. Having long-term guidance is essential, but it must be balanced with the agility to change course when conditions shift. Otherwise, there is a risk of being passively steered by the market, rather than making deliberate choices as a reinsurer.”

That tension between softer pricing and a more complex risk backdrop is one of the issues he expects to be high on the agenda in Zurich this week, where Sonndorfer will join other market participants to discuss current reinsurance conditions and what may shape the next renewal season. He said he is keen to hear how others are reading what he described as “a kind of a contradiction” in the market — declining rates in some areas, despite elevated risks in others such as geopolitics, AI and cyber.

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