The UK commercial insurance market is currently navigating a period of softening rates, a shift that many brokers, clients, and underwriters will recognise as part of the insurance cycle. After several years of hardening conditions, pricing has eased, and competition has returned. On the surface, this might seem like good news for policyholders and a welcome respite for brokers — but underneath lies a more complex picture.
Growth vs. Discipline: A Fine Balance
With rates softening, the temptation for insurers to chase top-line growth is strong. We’re seeing increased willingness to deploy capacity to MGAs and new schemes, sometimes with less scrutiny than we saw just 18 months ago. While growth is essential, it cannot come at the cost of disciplined underwriting.
Relaxed underwriting controls, particularly when combined with pressure to win new business, can lead to long-term problems. Insurers that loosen their risk appetite to write business at thinner margins – or delegate too much authority too quickly – may find that long-tail losses quickly erase short-term gains.
The Illusion of Calm: Weather Losses & The Role of Luck
Last winter was relatively benign in terms of weather-related claims. This undoubtedly helped boost results and keep combined operating ratios (CORs) in check. However, we cannot rely on mild weather to prop up performance.
A bad winter – with widespread flood or storm damage – could easily push insurers’ CORs above 100%, particularly those already writing business at marginal rates. The market’s current stability may owe more to luck than strategy, and that’s a dangerous foundation for any insurer.
Liability Risks: The Long Tail Wags the Dog
In liability lines, the risks are even less visible and often far more expensive. New facilities and MGA-delegated authorities might look profitable in years one and two, but claims in these classes usually emerge much later.
Year three is often when the true performance of long-tail books starts to become clear. Bodily injury, disease claims, and professional indemnity losses can take years to settle, and if the underwriting wasn’t rigorous from day one, the results can be painful.
A Word to the Wise
There’s a real risk that the market is trading away underwriting discipline in pursuit of market share. This is not sustainable. True underwriting profit – not just premium growth – remains absolutely vital.
As economic uncertainty continues to impact many businesses across the UK, insurers must support their clients with fair pricing and responsive cover. But that support can’t come at the cost of long-term financial stability.
A Turning Tide?
It’s also worth remembering that markets can harden just as quickly as they soften. All it takes is a few quarters of poor results, a significant CAT event, or reinsurance capacity tightening – and the landscape can shift overnight.
When that happens, experience will matter. Brokers and underwriters who understand the cycle, have built sustainable books of business, and have maintained close relationships with their clients and partners will be best positioned to navigate the shift.
In Conclusion
The current softening market presents both opportunities and risks. By all means, let’s support growth and innovation — but not at the expense of core underwriting principles. Now, more than ever, we need to focus on sustainable, long-term value for our clients and our businesses. Because in insurance, as in the weather, calm conditions never last forever.