Page 26 - The Insurance Times November 2025

Cost Reduction: Proactively identifies and mitigates 3. Excessive Risk-Taking: Over-reliance on models
issues before they result in costly losses. without appreciating their limitations, leading to the
Increased Revenue: Enables the company to assumption of unmanageable risks.
confidently take on well-understood risks in pursuit of 4. Lack of Implementation: Having a framework on paper
profitable opportunities. that is not actively used or embedded in daily
operations.
Resource Optimization: Directs attention and
resources to the most significant threats and 5. Lack of Risk Identification: A failure to proactively
opportunities. identify and assess emerging or existing risks.

Better Decision Making: Provides leadership with the 6. Herd Mentality: Following industry trends or
clear, risk-based insights needed for strategic choices. competitors without an independent assessment of the
associated risks.
Improved Reputation: Demonstrates a commitment
to stability and sound governance, strengthening the 7. Mindset Issues: A complacent attitude that assumes
brand. major risk events "will not affect us."

Regulatory Compliance: Ensures adherence to 8. Lack of Transparency: Hiding bad news or presenting
regulatory requirements, avoiding fines and sanctions. all risk indicators as "green" to avoid difficult
conversations.
Strong Governance: Fosters a culture of accountability
and oversight. 9. Failure to Spot Long-Term Risk: A myopic focus on
short-term issues at the expense of identifying strategic
Top Reasons for Risk Management Failures threats.

Despite these benefits, history is replete with examples of 10. Lack of Risk-Based Decision Making: Allowing strategic
organizational failure where risk management was present decisions to be made without proper consideration of
but ineffective. The most common reasons for these failures the risk-return trade-offs.
include: 11. Improper Oversight: Insufficient challenge and review
1. Poor Governance: A lack of clear accountability, from the board and senior management.
oversight, and authority for the risk management
function. Ultimately, long-term success in the insurance industry
2. Poor Risk Culture: An environment where risk is not depends on fostering a proactive and deeply integrated risk
taken seriously, bad news is hidden, and there is a weak management culture, where risk awareness is the
"tone from the top." responsibility of everyone in the organization.

European reinsurers face pressure on renewals amid rising costs

and risk models

European reinsurers are experiencing mounting pressure during renewal negotiations due to rising claims costs, tight-
ening capital, and evolving risk modelling. According to a recent industry report, the January 2025 renewals cycle
highlighted a shift in dynamics, where cedents are pushing back against rate hikes and stricter contract terms intro-
duced in prior cycles.
Reinsurers, grappling with higher inflation, climate-related catastrophes, and geopolitical tensions, are seeking to
retain pricing discipline. However, insurers are now demanding greater flexibility, especially in property-catastrophe
treaties and lines exposed to climate and cyber risks. Some reinsurers are cautiously re-evaluating their exposure,
while others are adopting more sophisticated underwriting strategies to justify terms.
Market analysts note that while the pricing remains elevated compared to pre-2022 levels, competition is returning,
especially from alternative capital providers and insurance-linked securities (ILS) funds. This is subtly shifting the balance
back toward buyers in certain segments.

Despite the pressures, reinsurers remain focused on profitability, prudent capital deployment, and selective under-
writing. The European market is expected to maintain cautious optimism for the mid-year and 2026 renewals, though
continued macroeconomic and regulatory challenges will influence long-term strategy.

24 November 2025 The Insurance Times