Are insurance markets really softening?

Is the global insurance market softening? Not exactly according to industry stakeholders, including major brokerages Marsh, WTW and Aon. Reports from these firms say that directors and officers (D&O) is soft and cyber is soft or getting close. However, inflationary and capacity pressures remain across other lines, including property and casualty (P&C) insurance.

“The insurance market is transitioning between hard to soft,” said Scott Eccleston (pictured above). “I would classify it as multi-speed.”

Eccleston is head of Global Placement for Marsh in the Pacific Region. He said that the D&O market is now in a soft cycle.

“Whereas all other classes aren’t quite there yet,” said the Melbourne-based broker.

Competition has returned to some lines

The Marsh leader said improved insurer underwriting performance and increased overall profitability are behind the softening.

“This has led to an increased appetite for growth and a welcome return of competition and choice for insureds,” he said. “Insurers have entered growth mode but are still cautious, in particular for insureds who have natural catastrophe exposures.”

Nat cats in Canada, the UK and California

Globally, those exposures came into sharp focus this week.

Meanwhile, the UK is experiencing serious flooding and California is being ravaged by the massive Bridge Fire.

At the time of writing, evacuations are underway in Florida as Helene, a category 1 hurricane, bears down on the coast.

More coverage choices

However, despite these challenges, brokers and consumers in some markets are seeing more coverage choices.

Eccleston pointed to Australia.

“We’re seeing more choice of insurers, both existing insurers with broadened appetite as well as new market entrants such as Everest, Markel and the continual emergence of new insurance MGAs (managing general agents),” he said.

Property market as “multispeed”

The property market in Australia – and likely elsewhere – is a good example of Eccleston’s description of global insurance markets as “multispeed.”

“The domestic market is still very challenged for homeowners in natural catastrophe areas for storms or bushfire, as well as the motor vehicle insurance market where inflationary pressures are negatively affecting the cost of repairs,” said Eccleston.

One reason for the difference is underwriting performance.

“Commercial property insurance market premium rates have been increasing for more than seven years so the recent change in buying conditions is not a surprise,” he said. “Underwriting performance has significantly improved and the hard market phase went one year longer than some expected.”

Eccleston said insurers have “more than achieved the rate adequacy they need or desire.”

LTAs are back

Another sign of market softening, said Eccleston, is the return of long-term agreements (LTAs).

“I wouldn’t say LTAs are widespread yet but they are certainly back in the frame and being discussed,” he said.

The Marsh leader recommended that insureds seriously consider LTAs in the D&O market, especially if they are changing their carrier.

“This would offer certainty for year 2 or even year 3,” said Eccleston. “Overall it is a positive sign for everyone that LTAs are back in vogue.”

How does 2025 look?

In a recent article, the Agent Support Network of America (ASNOA), a network of insurance agencies, was reasonably confident that insurance markets will continue to soften through 2025.

What signs of insurance market softening are you seeing? Please tell us below