The 2025/26 global renewal season is showing clear signs of a softening market: new capacity, aggressive rate competition and increased term flexibility are all in evidence. In this environment, the challenge for reinsurers is not simply pricing, but preserving underwriting discipline, structuring sustainable solutions and safeguarding long-term relationships.
This article, from NPRe’s Andrew Bye, examines:
- why rate-chasing is risky • how structural incentives matter
- why crafting the right solutions helps to maintain valuable partnerships
- how market corrections reward sustainable strategies, and
- what should the industry be preparing for.
Entering a Soft Market
After a long period of hard market conditions, the industry is again entering a soft market with competition around pricing setting the agenda. New entrants and fresh capital are competing for space, pushing rates downward and stretching terms. For many players the temptation to prioritise volume over value is becoming increasingly difficult to resist.
But where pricing looks attractive today, it often proves costly tomorrow. Soft markets are not inherently dangerous; it is the behaviours they encourage that carry risk. The decisions reinsurers make in this environment will shape their portfolios long after 2025.
Why “Naïve Capital” and Rate-Chasing Are Warning Signals
One of the hallmarks of a softening market is the influx of capital less constrained by past losses, less experienced in underwriting cycles, and more willing to chase volume by reducing margin. The peril is clear…when we start aggressively pricing to win business, we see an erosion in due diligence, careful risk selection, and underwriting discipline, as the race to the bottom takes hold.
Underwriting discipline shouldn’t just be the preserve of a hard market… firms need to be disciplined before the cycle turns. Without it, we see portfolios which accumulate deferred losses, and the capital that once seemed abundant becomes exposed. History shows that the portfolios built fastest during soft markets are often the first to strain when losses emerge or the cycle turns.
So what are we expecting to see this season? Perhaps pockets of aggressive pricing will emerge across several classes, particularly those where recent loss experience has been muted or where barriers to entry are low.
For example, in the Mining and Recycling segments, we are seeing disruptive MGAs aggressively pursue niche opportunities, prioritising commission-based models over performance-based remuneration. Professional Indemnity mirrors this dynamic, with MGAs issuing capacity that is mismatched to market realities.
Whether this develops into a full-scale race to the bottom will depend on how many market participants choose to prioritise growth over discipline. If enough carriers hold their line, the softening may remain orderly. If not, we risk a scenario where underpricing becomes self-reinforcing and spreads quickly across segments.
Where Structure Shapes Behaviour
We also need to scrutinise how much genuine risk carriers and capacity providers are holding and is it worth clients considering who the ultimate source of capacity is. Are their providers true partners in risk, or simply passing exposures through retrocession or similar arrangements while collecting ceding commissions? Increasingly, we see newer reinsurers focused less on underwriting performance and more in fixed margins or fee income. Because they don’t carry the full consequences, it becomes harder for them to resist competing on price and letting margins slip.
We also need to scrutinise how much genuine net risk carriers and capacity providers are actually retaining, and whether clients should place greater emphasis on understanding the ultimate source of capacity. In some cases, providers may present themselves as risk partners while largely passing exposures through retrocession or similar arrangements, retaining limited downside while earning ceding commissions or fixed margins. Where meaningful economic exposure is absent, underwriting discipline is harder to sustain. Providers face less incentive to resist price competition, and margins are more likely to erode. This dynamic is increasingly evident among newer reinsurers whose business models place greater emphasis on fee or fixed-margin income than on long-term underwriting performance.
Another factor to consider is the potential impact on clients’ approach to risk mitigation and investment in risk management. As additional capacity enters the market and underwriting requirements become more flexible, the emphasis placed on certain risk controls within proposals may lessen. This can influence how risk management measures are prioritised, even though they remain an important component of long-term risk outcomes.
This model may appear attractive in the short term, but it raises questions about alignment and resilience when losses inevitably surface. Sustainable partnerships demand more than transactional capacity – they require carriers willing to share and invest in risk meaningfully, apply discipline, and stand alongside clients through the cycle.
NPRe, by contrast, operates a model in which it retains its own risk on a net basis, and does not buy reinsurance. This means that every exposure sits directly on the company’s balance sheet, and every underwriting decision carries full economic consequence. Chasing underpriced business is not just unwise, but is fundamentally misaligned with how we operate and not something we seek to do.
In this way, the structural incentives align with long-term survival rather than short-term ambition. Discipline is a must, regardless of the cycle we’re in.
Crafting the Right Solutions Not Just Winning the Rate Battle
Chasing the lowest rate without regard for fit, terms, exposure and structure can undermine value over time. In our experience, the most sustainable partnerships are built not on price, but on solutions that genuinely fit clients’ long-term needs. They align incentives, provide clarity of terms and anticipate future volatility.
It’s why we are proud to say that nearly 40% of our clients have been with us for four years or more.
We believe building the right solution beats simply winning the rate today – a process and philosophy that has served us well since our launch in 2016.
For brokers and cedents, the right solution protects not only against today’s known risks but the uncertainties ahead. For reinsurers, it creates portfolios that are built to withstand volatility rather than capitalise on temporary pricing power.
Market Corrections: The Inevitable Test
Soft markets don’t last forever. When they reverse, the consequences of choices made during the soft period become clear. Insurers who chased volume and fast growth often face capacity pull-backs, swift repricing and a need to retreat from segments where they once competed hard to enter. Meanwhile, reinsurers that held their nerve and maintained discipline will likely emerge with healthier portfolios and stronger relationships.
In effect, the next market correction will be the ultimate proof point for which strategies were genuinely sustainable. It’ll be interesting to see how it all unfolds.
Looking Ahead: What Should the Industry Be Preparing For?
First, recognise that soft markets tend to mask underlying risk signals rather than eliminate them. This means doubling down on exposure analysis, scenario testing and portfolio stress assessments, especially in areas where capital is entering most actively.
Second, underwriting frameworks need to be consistently applied. The aim is not to match the market at its weakest point, but to protect the resilience of the portfolio throughout the full cycle. Insurance is about providing financial protection against the chance of an adverse event arising. Most of these events do not change in likelihood by a great degree – in other words, the odds remain the same – and yet pricing and cover varies from year to year.
We must ensure that the solutions we bring to clients are designed for durability, not just competitiveness. Tailored structures, transparent terms and a clear understanding of how risks evolve over time will matter far more than marginal differences in rate.
In short, while aggressive pricing behaviour is likely to appear in this renewal cycle, the impact on the industry will depend on the choices made now. Those that remain disciplined and prepare for the cycle turn rather than the next quarter will be best positioned when the market eventually corrects.