Howden Re releases Breaking the Glass
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Howden Re, the global reinsurance, capital markets and strategic advisory arm of Howden, has released Breaking the glass: building resilience before it is tested, a deep-dive into the dynamics underpinning (re)insurance market cycles.
The reinsurance market enters the final months of 2026 from a position of considerable strength. Pricing is falling from the elevated levels established during the recent hard market, supported by strong results and elevated capital. Yet the external environment is considerably less settled, with heightened equity risk premia and financing costs alongside continued economic and geopolitical uncertainty.
Drawing on nearly a century of US P&C underwriting data, the report examines a series of historical analogues to assess how underwriting performance, capital conditions and the wider financial environment have interacted over time. It brings those lessons into the present, testing how concurrent pressures could affect today’s market, before considering how carriers can strengthen resilience, preserve optionality and manage volatility as conditions evolve.
Today’s reinsurance market presents a paradox. Profitability is strong, capital is abundant and reinsurance pricing continues to soften, but this is not indicative of a less risky world. In fact, global risk levels – reflected in higher debt and equity financing costs – are elevated, narrowing carriers’ return above the cost of capital. For reinsurers, this underlines the importance of deploying capital selectively and preserving flexibility. For buyers, it reinforces the relative value of reinsurance and the imperative to secure optimal protection at this unique point in the cycle
As reinsurance pricing softens, clients have greater scope to think strategically about how their programmes support wider business objectives. The value of reinsurance extends beyond price to how effectively it manages volatility, protects capital, preserves flexibility and supports growth. Our focus is on helping clients use the options available today to build resilience through every phase of the cycle
Key findings
When history rhymes
Historical US P&C underwriting data help trace the forces that have shaped market turns over time. Through a series of case studies, the report examines the different combinations of underwriting, financial and external pressures that have preceded previous cycle shifts. While the catalysts have varied, the analysis illustrates that the scale of an event alone does not necessarily determine the market response. The most consequential dislocations have more often occurred when several pressures converge, while significant financial or insured-loss shocks have been absorbed without equivalent market corrections when broader conditions were more supportive.
History in practice
The report uses a simplified directional model of the global reinsurance market to assess how concurrent underwriting and macroeconomic pressures could affect capital, profitability and pricing. In the absence of a major shock, strong underwriting profitability and capital accumulation allow the market’s existing softening momentum to continue. Changing that trajectory within a single year would require a severe convergence of underwriting and financial pressures, demonstrating the market’s considerable capacity to absorb stress. Historical experience nevertheless shows that conditions can change quickly when underlying assumptions shift and pressures begin to accumulate, emphasising the value of implementing resilience measures while conditions remain supportive.
Lessons in action
Across developed markets, debt financing costs sit at multi-decade highs with equity valuations demanding high return hurdles. Reinsurance is, by comparison, an increasingly attractive form of capital. For cedents, current conditions provide greater scope to reconsider how reinsurance is used across the portfolio, from the amount and type of protection purchased to diversification, optionality and alternative sources of capital. This is particularly relevant as cedents have retained a greater majority of natural-catastrophe exposure in recent underwriting years.
For reinsurers, additional capacity and competition are placing pressure on pricing and economic returns. The report emphasises directing capacity towards areas where risk-adjusted returns continue to support value creation while retaining the flexibility to redeploy capital as conditions change.
Breaking the Glass
Outlook
The report concludes that a substantial deterioration in underwriting or financial conditions would be required to reverse the market’s current softening momentum. A weakening in the wider financial or macroeconomic environment could, however, reduce the market’s capacity to absorb underwriting volatility and leave it more exposed to future shocks.
For now, conditions remain favourable for buyers and markets. Pricing has fallen materially from recent peaks but remains elevated in many areas relative to previous soft-market troughs, creating an opportunity to look beyond immediate price reductions and use current conditions to build resilience for future volatility.
The potential impact of a shock year on reinsurance capital
See what a catastrophe, a rate move and rising claims costs would do to reinsurance capital. Try it yourself.
**This tool is illustrative only. Starting capital and premium reflect actual, reported industry figures. All other fixed assumptions, including loss ratios, expense ratios, asset mix and reinsurance cession, are simplified, broad-based estimates. Outputs are hypothetical and directional, showing the scale and direction of an effect, not a forecast or a precise prediction. Only catastrophe loss size, interest-rate movement and claims cost inflation are adjustable, allowing users to see how the outcome would shift under different conditions, not what will actually happen. For more detailed, portfolio-specific scenario analysis, please contact Howden Re directly.