Reinsurance in transition: from cyclical hard market to structural transformation

Following the release of ‘Who dares wins’, a Howden Re report navigating today’s hard market softening, Howden Re experts discuss its findings and the implications for the APAC reinsurance market.

Key points:
Rates ease but remain well above 2010s levels
APAC cedants face volatility, seek stability
MGAs now strategic, not niche participants

How would you categorise the current market cycle?

Sebastian Cook, deputy CEO, Howden Re International: We are in a phase of hard market softening. Rates have moderated from the 2023 peak but remain well above the 2010s. Investors have been rewarded with excellent near-term results, enabling reinsurers to pursue growth strategies in the coming renewals. This strong financial foundation and client demand for strategic value are driving renewed collaboration between cedants and reinsurers.

David Flandro, head of industry analysis and strategic advisory, Howden Re: Geopolitical risk is elevating global risk premia and increasing complexity and capital constraints. The global protection gap remains stubbornly high. The industry’s priority is to strike the right balance between maintaining underwriting discipline while ensuring long-term partnership with clients.

Beyond macro and geopolitics, how is rising nat-cat severity reshaping the market?

Andy Souter, head of Asia-Pacific, Howden Re: The dual characteristics of elevated severity and increasingly frequent nat-cat events present challenges for insurers in APAC, especially when seeking to manage earnings volatility. There is also growing opportunity for cedants to explore parametric products that are tailored to complement indemnity covers, bringing efficient coverage and the added benefit of prompt cash flow to allow them to expedite claims payments to customers.

Flandro: As of January 1, 2025, cedents retained approximately 62% of modelled nat-cat exposure, underscoring how much risk remains on their balance sheets. The long-term average is 54%. In addition, the binary between peak and secondary perils is no longer evident: secondary is now peak. Every year this decade has exceeded $100 billion in insured cat losses. Yes, the sharp, 37% rate-on-line increase of 2023 is softening; the more interesting question is: ‘Is there a floor?’ It is notable that risk premia as evidenced by interest rates, inflation and loss volatility mean carrier return hurdles and WACCs are notably higher than in the last soft market. In this environment, reinsurance – a form of contingent capital – is highly valued by cedents.

Where do MGAs and innovation fit in today’s market?

Cook: MGAs are no longer niche but strategic. They play a vital role in helping the market reach underserved risks such as flood, cyber and SCS. With better analytics, MGAs deliver underwriting precision and diversification.

“We are in a phase of hard market softening.”

Flandro: Programme structure and capacity innovation must be focused with clear, immediate benefits in this phase of the market cycle. We see growing demand for earnings protection, aggregate solutions and parametric structures, combined with capital markets instruments enabling cedents to achieve the best outcomes. These tools help clients manage risks that traditional indemnity models cannot fully address. In this vein, the MGA wave of this decade is structural, not cyclical; there is now a permanent, new base of MGA capacity driven by those with technology and underwriting acumen.

Souter: Parts of APAC, especially Australia and New Zealand, have seen significant MGA growth driven by product specialism, new distribution channels and innovative technology. MGAs are increasingly embedded in the wider APAC landscape with local and global players attracted to broader opportunities in the region. Providing capacity to MGAs has given (re)insurers the opportunity to enter new, niche product areas, securing growth and diversification in a potentially capital-efficient way. Insurtech platforms in the shape of MGAs or tech-enabled distribution and product platforms are also bringing further innovation to the market, often reaching customer segments that may not typically buy insurance.    

“The cycle has turned, but from a position of strength.”

Looking ahead, what will define success in 2026 and beyond?

Cook: Reinsurers are ubiquitously seeking to grow and deploy into smart, sustainable programmes. Methodical innovation and trusted relationships will define success.

“Transparency, in terms of data, assumptions and clear logic, will define success.”

Flandro: The cycle has turned, but from a position of strength. Reinsurers have restored margins; cedants have taken on more risk; capital is being selectively deployed. Those combining insight, data and discipline will be best placed to sustain performance.

Souter: Transparency, in terms of data, assumptions and clear logic, will define success. The market performs best through transparent, trusted relationships between cedants, reinsurers and their intermediaries.

Sebastian Cook is deputy CEO of Howden Re International. He can be contacted at: sebastian.cook@howdenre.com.

David Flandro is head of industry analysis and strategic advisory at Howden Re. He can be reached at: david.flandro@howdenre.com.

Andy Souter is head of Asia-Pacific at Howden Re. He can be reached at: andy.souter@howdenre.com.

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