As the severity, cost and frequency of natural catastrophes increases there are concerns that the global reinsurance sectors’ ability  to manage the losses is diminishing.

Reinsurance broker Howden Re, has released new research indicating that US P&C insurers may be entering the next phase of the underwriting cycle with less room to absorb volatility.

The report’s analysis of 14 nationwide carriers over a 25-year period finds that average catastrophe loss loads have more than doubled since the early 2000s and warned 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.

Peter Evans, research director at Howden, said: “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.”

Howden Re added 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.

However, the average catastrophe loss load has increased from 4.4% in 2015-19 to 5.4% in 2020-25, the sharpest increase across the 25 year timeline. Frequent mid-sized events, particularly SCS have largely driven this increase. Despite this shift, the average combined ratio across the 14 insurers improved from 96% (2015-19) to 93.4% (2020-25), as higher pricing offset rising losses.

The study also found widening gaps between carriers. The delta between the lowest and highest catastrophe loss burden expanded from 7.1 percentage points in the early 2000s to 11.7 points in 2020-25. Underwriting discipline, portfolio construction and reinsurance strategy are playing a growing role in performance outcomes.

The average catastrophe loss load for the composite increased from 2.7% in 2000-04 to 5.4% in 2020-25. 2020-25 saw a larger jump than any five-year period since 2000, driven by the high frequency of low-to-mid sized losses, severe convective storms (SCS) in particular.

The composite combined ratio (for all lines) fell by 2.6 percentage points from 96.0% in 2015-19 to 93.4% in 2020-25. Cumulative direct property rate rises of ~160% from 2017 to the 2024 peak, alongside tighter terms, helped offset elevated catastrophe losses – tailwinds that are now reversing as double-digit rate reductions earn through.

Looking ahead, the analysis shows that if non-catastrophe performance were to return to softer market levels and catastrophe losses remained at recent averages, underwriting margins could more than halve from around 6.6% to 3%, limiting insurers’ ability to absorb losses. Crucially, recent years have not ranked among the most volatile on record, implying that profitability buffers are narrowing even without any impact from a severe shock.

Competitive conditions at 1 January 2026 reinsurance renewals created additional flexibility for buyers. Many insurers achieved savings on core reinsurance programmes, creating scope to reassess protection levels ahead of peak wind season.

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.”