Rising catastrophe loads, softening rates signal critical shift in reinsurance strategy: Howden Re

A new report from reinsurance broker Howden Re suggests that as natural catastrophe losses continue to rise and pricing tailwinds continue to fade, current reinsurance market conditions present a critical opportunity to reassess protection and get ahead of the next phase of the cycle.

The broker’s report finds that average catastrophe loss loads have more than doubled since the early 2000s, with the firm warning that a reversion to soft market pricing could compress underwriting margins, materially reducing the industry’s buffer against heightened catastrophe volatility, including elevated severe convective storm (SCS) activity or a major hurricane.

“Over the past several years, insurers have benefited from sharp rate increases, particularly in property insurance. Between 2017 and the 2024 peak, property rates rose by approximately 160%, helping to absorb growing catastrophe losses and support strong reported results. The market is now shifting into a softening cycle, resulting in declining rates, increased competition and widely available capacity,” Howden Re explained.

Kyle Menendez, Managing Director, Howden Re, commented: “Reassessing volatility protection is critical as the cycle turns. Catastrophe pressures have structurally increased as primary rates have softened. Carriers have a clear opportunity to strengthen reinsurance programmes before severe losses test thinner margins. Those that move early in what remains a buyers’ market can reduce earnings volatility and support disciplined growth.”

The broker’s report also suggests that the buyer’s market facing cedents at recent renewals, notably on January 1st, favours increasing reinsurance protection.

Tim Ronda, CEO, Howden Re, said: “Across the January renewals and into 2026, we are seeing competition intensify in many segments.

“Strong recent results should not obscure the fact that the underlying risk environment still contains inherent volatility. Insurers that use this cycle transition to recalibrate their risk appetite, optimise reinsurance structures and reinforce capital resilience will be far better positioned when the next event occurs.”

Howden Re’s report emphasises that although reinsurers are well-capitalised and capacity is generally accessible, competition has intensified in several sectors, particularly in areas where recent catastrophe loss experiences have been minimal.

The decline in primary rates is taking place amid a context of heightened catastrophe risk, influenced by elements such as climate volatility, rising asset values, and the complexities associated with global exposures.

In light of this, the report underscores that this combination indicates insurers may encounter increased potential earnings volatility if catastrophe losses escalate while margins narrow.

Another key takeaway from the report, is that as the soft market compresses the ability to absorb losses, it may render reinsurance more vital and appealing to re/insurers seeking to manage their capital with greater efficiency.

“When deployed strategically, it can reduce the cost of capital, improve solvency, minimise earnings volatility and support disciplined growth – attributes that are especially valuable in today’s heightened risk landscape and softening property market,” Howden Re said.

“The 1 January 2026 renewal brought highly competitive market dynamics, with reinsurers demonstrating strong support for cedents. Most insurers achieved meaningful savings on core placements, helping to offset primary rate pressure and creating incremental budget capacity.”

Peter Evans, Research Director at Howden, added: “The hard market helped absorb rising catastrophe losses, but it also concealed how much the underlying cost base has shifted. The average catastrophe loss load has increased from 4.4% in the late 2010s to 5.4% in the 2020s, representing a meaningful shift in the baseline. As rates decline, the industry may have less room to absorb volatility than recent results suggest.”