Reinsurers risk misreading cycle as cat losses drive softening: Arundo Re

Benign catastrophe losses are fuelling reinsurance softening, but Arundo Re warns the market might be overlooking inflation and longer-tail risks.

Key points:
Benign cat losses drive softening
Long-tail inflation may be underpriced
Arundo prioritises established cedants

Reinsurers risk misreading the market cycle if benign catastrophe losses are allowed to drive broader rate cuts before the longer-term effects of inflation are understood, according to Arundo Re chief executive Bertrand Labilloy.

“The trend in the reinsurance market is still driven by the natural catastrophe experience, with the first half of 2026 following 2025 on the same path – that is to say, very low natural catastrophe losses fuelling the softening market,” Labilloy told Monte Carlo Today.

But he cautioned that using recent short-tail experience as a guide to wider pricing could leave reinsurers exposed to deterioration elsewhere (in particular because this experience is very volatile as we could see during this summer).

“We should all take care over a potential future surge in inflation that could be stirred by the crisis in the Strait of Hormuz,” he said. “The impact of a surge in inflation on long-term business lines is still badly considered, or not considered at all.”

For Labilloy, that points to a wider question about whether the market is correctly judging where it stands in the cycle.

“Once again, the market might be misreading the market equilibrium by looking through the lens of short-term risks, while we should look at long-term ones,” he said.

Is the cycle turning too soon?

Inflation is one reason Labilloy questions the renewed softening. The relatively short duration of the recent hard phase is another.He noted that the market had experienced around eight years of softer conditions before the hard market of 2023 and 2024, raising the question of whether the subsequent “recharging phase” has lasted long enough.

“As long as there is symmetry between the recharging phase – hard market – and the drawing phase – soft market – it’s OK,” he said. “When there is an imbalance, there may be a problem, either to the detriment of clients or capital providers.”

That concern is also shaping how Arundo intends to deploy capacity as competition increases. As a mid-sized reinsurer, Arundo does not seek to compete head-on with the largest global players. Instead, Labilloy sees an opportunity to provide an alternative source of capacity for cedants that value diversity on their panels and longer-term relationships.

“Our aim is not to outperform the global giants,” he said. “Our aim is to offer a buy-side alternative to cedants that don’t want to trade with only a small club of participants, and also to cedants that give value to the long-term relationship approach.”

Labilloy described the opportunity using a French expression: “Entre les pattes du mammouth, il y a toujours de l'herbe à brouter” – between the mammoth’s paws, there is always grass to graze.

“The critical point for reinsurers is to be as strong as possible at the end of the softening market.”

Loyalty shapes capacity

That relationship philosophy will have practical consequences as buyers seek better terms. “We are not prepared to respond positively to softening requests from cedants that are purely opportunistic in their buying approach,” Labilloy said. “We will always allocate our capacity in priority to our long-standing partners.”

Arundo’s ability to take that approach is supported by its ownership. The reinsurer is wholly owned by French mutual insurance groups SMABTP and MACSF, neither of which is listed. Labilloy said that structure allows it to take a longer-term view of financial strength and growth as market conditions deteriorate.

“The critical point for reinsurers is to be as strong as possible at the end of the softening market, in order to benefit from the next market turning point,” he said.

Positioning for the turn

How far Arundo expands will depend on both its shareholders’ risk appetite and the market cycle. As its 2022-2027 roadmap enters its final phase, the reinsurer plans to deepen existing relationships and further diversify its portfolio to reduce volatility in premium and earnings.

It will open a branch in India’s GIFT City and is considering expanding its property or property catastrophe business in the US, but not casualty.

Geography, however, is not the primary driver of its growth strategy.“The greatest opportunity for profitable growth for us over the long term is to work with cedants across the board and across various markets, and with cedants that are not unreasonable in their price and condition expectations,” Labilloy said.

Bertrand Labilloy is the chief executive officer of Arundo Re. He can be contacted at: blabilloy@arundore.com

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