As reinsurers get set to head to Monaco there are warnings that the  reinsurance market enters the final months of 2026 in a state of paradox.

Broker Howden has issued a new report which finds pricing is falling rapidly from the elevated levels established during the recent hard market, supported by strong results and abundant capacity.

Yet it added conditions beyond the market are moving the other way: the world is conspicuously volatile. Inflation is elevated. Global bond pricing shows that compensation for risk and duration is rising, with term premia rebuilding across major sovereign curves.

Thousand of reinsurers from across the world will gather in Monaco for the annual Monte Carlo rendezvous which begins on Sunday with an expectation that rates and terms will come under increased pressure.

Howden’s report explained: “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.”

The report –  Breaking the glass: building resilience before it is tested – is designed as a deep-dive into the dynamics underpinning (re)insurance market cycles.

David Flandro, (pic) managing director, head of industry analysis and strategic advisory said: “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”
The report explained 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.

The report concluded 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,” it stated. “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.”

Howden Re CEO Tim Ronda, added: “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.”