The commercial insurance market in Australia has softened over the last 12-18 months. This means insurers are more willing to take on risks across certain risk classes, and in some instances, at lower premiums.
There are several key drivers behind the recent market softening:
- Increased insurer capacity and appetite is one of the strongest influencers of the market shift. Compared to the Covid years, insurer capacity has increased due to increases in profitability and improved reinsurance conditions. This means that insurers are able and willing to take on more risk.
- Heightened competition in the insurance market is also contributing to the softening market conditions. Due to the global capital surplus, competition is rising which in turn pushes premiums down.
- Underwriting results have stabilised, with the corrective pricing cycles coming to an end. In addition, stabilised loss ratios have removed the need for upward pricing pressure.
- Surplus global capital is driving insurers to pursue market share more aggressively, with sharper competition seen in liability lines and Directors and Officers (D&O) in low-risk sectors.
Other factors that contribute to the softening market include improved confidence among insurers, stable reinsurance costs and the lower natural catastrophe losses in 2025, compared to previous years.
What to expect in a soft market
Soft markets tend to favour buyers. Generally, premiums trend downwards, broader insurance cover is available and underwriting criteria relaxes, which enhances the available cover. More policies are issued, there are higher limits, and with the increase in capacity, insurers are more competitive.
How to respond to soft market conditions
During soft market conditions it is wise to undertake a detailed review of current coverage, policies and excesses. Brokers can ensure practical opportunities are not missed, like:
- reviewing sums insured (the cost of replacing key equipment against today’s market prices),
- exploring broader coverage for risks previously unavailable or unaffordable
- addressing new and emerging risks within industries
- leveraging favourable market conditions to enhance risk controls, demonstrating improved risk quality and positioning the business for more sustainable pricing over the long term.
Actions
Businesses will be well positioned to find opportunity in the soft market with these key actions.
- Be open to changes in how your programs are structured.
- Start the renewal process early.
- Talk to your EBM Account Manager.
