Rather than simply restricting growth in a soft market, reinsurers should actively use the period of market softening to prepare for and position themselves for the next hard market, according to Oxbow Partners.
According to Oxbow research, the most successful reinsurance companies achieve best cross-cycle performance by pursuing growth throughout the entire cycle.
Following years of exceptional profitability, peak pricing, and strong capital buffers across 2023 to 2025, the market cycle has begun to shift.
“It is clear that we are at – or have passed – a turning point in the cycle. Compounding a challenging pricing environment, reinsurers are also facing higher costs of competing due to rising technology and data investments, and must maintain relevance as traditional and ILS capital floods the market. The ageing demographic profile of the industry adds urgency to the transformation agenda,” Oxbow analysts stated.
When entering a soft market, reinsurers instinctively choose a defensive strategy, dedicating “cycle management” sessions to cutting exposure and protecting the downside. However, Oxbow research reveals that this defensive stance is “the wrong instinct.”
True cross-cycle outperformance is not achieved by limiting growth during soft market phases; instead, top-performing reinsurance entities actively pursue expansion across all market cycles.
While primary profits are secured during hard markets, soft markets differentiate outperformers from underperformers, with the former using this period to prepare for the next hard market, while the latter retreats.
To achieve exceptional performance over the next cycle, standout reinsurers will concentrate on five key themes
Have a clear strategy for the soft market; find your “edge”- critical to drive outperformance and the galvanising reason why the company is better than others; stop treating every relationship the same; communicate consistently to every stakeholder; and use AI to scale the business efficiently, not just cut admin.
“The winners at the top of the next market will be those who maintained a winning mindset during the soft market and did not retreat away from long-term performance. They will have used the next five years to find and explain their “edge” to stakeholders, and build the assets that allow them to win,” Oxbow concluded.
