Structural changes introduced during hard market likely to endure in 2025: Howden

According to Howden’s 2025 market report, the January 1 reinsurance renewals experienced notable softening overall, reflecting strong price adequacy and reinsurers’ ambitions for growth.

Howden explained that over the past 12 months, favourable supply dynamics have become increasingly apparent in both the commercial insurance and reinsurance markets.

These dynamics were reportedly instrumental in shaping the 1 January 2025 reinsurance renewals, driving competition that resulted in risk-adjusted rate reductions across various sectors.

“Demand for reinsurance was driven by volatile loss experience, rising exposures and model changes, whilst increased appetite from both traditional reinsurers and capital markets generated more than sufficient supply,” Howden added.

As per the firm’s report, despite elevated catastrophe activity in 2024, including the uncertainty surrounding losses from the late-season Hurricanes Helene and Milton, favourable market conditions enabled insurers to navigate these challenges and secure property-catastrophe placements with rate reductions.

Global property-catastrophe risk-adjusted rates decreased by 8%, with U.S. renewals achieving price drops of 7.5%–15%. In Europe, loss-free programs saw reductions of 3%–15%, while loss-affected areas faced price increases.

As for the January 1 Casualty reinsurance renewals, Howden witnessed marked differentiation, with US outcomes shaped by litigation risks, loss cost trends, portfolios’ loss experience, rate changes, and reserve development, while international renewals benefitted from abundant supply and strong fundamentals, enabling smooth placements.

Turning to the retrocession market, the firm observed that another profitable and largely loss-free year in 2024 created pressure on prices and signings at the renewals, with risk-adjusted pricing dropping between 10% and 20% on average.

Meanwhile, as per the firm’s report, several specialty lines also achieved risk-adjusted rate reductions at the January 1 renewals, driven by strong portfolio results and ample capacity.

In contrast, the trade credit and political risk market is said to have continued facing capacity constraints, with renewals seeing only modest changes to pricing and terms across both excess-of-loss and pro rata programmes.

Tim Ronda, CEO of Howden Re, commented, “The re/insurance market continues to present significant opportunity for growth. Companies across the sector are executing strategies that not only meet their cost of capital but, in many cases, exceed return hurdles.

“Investors should view the sector as one rich with growth potential and attractive opportunities. Encouragingly, our clients are beginning to see relief from the pricing pressures of the last three years in several segments.

“Even with this relief, we believe that end risk-takers can continue to generate strong returns and provide a stable and long-term source of efficient capital.

“This market environment creates an ideal space for an innovative organisation like Howden to develop new reinsurance products and structures, leveraging available capacity to benefit both clients and the industry—which is positioned for all participants to thrive. Over the next 12 months, we look forward to continuing our success in adding value for clients through an increasingly heightened macro risk landscape.”

David Flandro, Head of Industry Analysis and Strategic Advisory, Howden Re, added, “The transition from peak pricing continues to offer fertile ground for those able to leverage data, analytics and innovation.

“Market trends are unfolding in an environment of buoyant reinsurance capital set against a growing spectrum of risk, amidst a backdrop of increasing macroeconomic and geopolitical uncertainty.

“These interconnected dynamics underscore the critical importance of understanding the full breadth of market cycles and capital flows. At Howden Re, we are uniquely positioned to provide the insights and strategies our clients need to navigate this complexity, ensuring resilience and success throughout the cycle.”

David Howden, Founder & CEO, Howden, said, “Our report is something of a wake-up call for the industry. Carriers have experienced strong growth for the best part of a decade now but, as we show today, a reliance on price alone is no longer enough to sustain that momentum.

“The dawn of a new cycle presents fresh opportunity as insurers look for new business to drive growth. In a more volatile world, our clients are crying out for more protection in everything from cyber to renewables.

“So the stars are aligning. Greater emphasis on innovation, on collaboration and on listening to the needs of the customer will mean a win-win-win for clients, society, and insurance companies alike.”

Howden’s report concluded that whilst pricing is beginning to decline from historically high levels, structural changes introduced during the hard market are said to likely endure.

The firm went on, “Insurers are expected to face continued earnings volatility in 2025, as they absorb the majority of catastrophe losses – particularly from severe convective storms, floods, and wildfires – due to persistently high attachment points.

“The risk landscape remains unyielding. Devastating and escalating wars, commodity shocks, soaring prices, financial market instability, and high debt levels have ushered in a fragmented global order with profound implications for security, commerce, investment, supply chains, and political stability.

“This new reality places businesses and carriers in a persistently high-risk environment, with the potential to intensify further. If 2024 will be remembered for escalating conflicts, the ‘biggest election year ever,’ and economic divergence, 2025 is poised to be shaped by policy implementation (tariffs and trade) and the emergence of new cycles.”

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