Market conditions continued to soften as the 2025 calendar year drew to a close.
Profitability and solvency have remained steady, underpinned by strong underwriting results and healthy investment returns across the sector. Insurers are now prioritising growth by writing new business, pursuing strategic acquisitions, reallocating assets, and adopting digital tools, including AI driven analytics, to enhance operational efficiency and strengthen customer engagement.
Insured losses from natural catastrophes once again exceeded US$100B in 2025, marking the sixth consecutive year above this threshold. The record breaking LA wildfires in the first quarter, along with ongoing severe convective storms, were the primary contributors and continue to be major global loss drivers. The Swiss Re Institute estimates total insured losses for 2025 natural catastrophes at US$107B – around 24 per cent lower than the US$141B recorded in 2024.
Below we outline most insurance classes are expected to remain in soft market conditions as insurers carry on competing for market share. We observe early activity amongst major insurers that suggests consolidation of capital, and this may continue to emerge as a trend as 2026 unravels, and insurers look to increase their hold on market share. AIG acquired the renewal rights for Everest Group’s global retail commercial insurance book in late 2025, this transaction, represented around US$2 billion of premium globally.
We consider that the insurance clock is moving toward 3:30:
Property
The property market continues to soften. Insurers are offering notable premium reductions for well managed, attractive risks, supported by increased local and international capacity and broader conditions. Long-term agreements with fixed premiums are becoming more common.
However, properties in flood or cyclone prone regions continue to face higher premiums and tighter terms. As severe weather risks grow, insurers are updating their models, adopting AI tools, and using alternative risk transfer options like parametric insurance to better manage exposure, especially for high-risk coastal or island properties.
Insurers remain cautious about emerging technologies, particularly the growing use of lithium-ion batteries across industries. These batteries are increasingly linked to preventable fire risks, prompting closer scrutiny of everything from large-scale energy storage to everyday tools.
Commercial General Liability
Most industries continue to enjoy favourable insurance market conditions, giving businesses more influence over pricing, coverage terms, and programme design.
Insurers’ push for growth of their portfolios is driving meaningful rate reductions, particularly for organisations with stable risk profiles and well managed claims, where 5 to 10 per cent decreases remain common.
The local Australian insurance market is proving especially aggressive, frequently offering more competitive pricing than Lloyd’s of London and other overseas markets.
From a policy negotiation perspective, insurers are more inclined to offer multiyear long-term agreements with enhanced policy features and “locked in” rates over the period. This method is designed to secure policyholders in light of current market conditions.
Workers Compensation
Australian workers’ compensation schemes remain under significant cost pressure, compounded by a growing regulatory emphasis on psychological injury and the management of psychosocial risks under workplace health and safety laws. These factors have shaped premium outcomes for 2025/26, leading to a mix of restrained pricing and selective increases across different states.
The latter half of 2025 marked a major shift in New South Wales with the introduction of substantial psychological injury compensation reforms. At the same time, Victoria and Queensland continued implementing mandatory psychosocial hazard management frameworks, further influencing scheme settings and employer obligations nationwide.
Corporate Travel
Premiums are generally rolling over, with reductions available where exposures and loss histories remain stable. Insurers continue to prioritise accounts with business travel, while policies with substantial leisure components (over 25 per cent) remain non-preferred due to higher claim frequencies and rising costs linked to leisure trips. Losses stemming from leisure related incidents, especially those occurring overseas, have prompted updates to the definitions for Directors’ and Executives’ Private Leisure Travel to better clarify coverage intent.
Group Personal Accident
Demand for personal accident cover has grown as more employers require staff to return to the workplace, leading to a noticeable rise in journey related claims as commuting increases. At the same time, rising medical expenses, wage adjustments, and broader inflationary pressures are pushing insurer costs higher. Organisations are advised to reassess their weekly benefit limits to ensure they remain appropriate and keep pace with the increasing cost of living.
Motor
The motor vehicle insurance market has held steady since the July 2025 update. Small vehicle and small fleet policies are commonly facing premium increases of 5 to10 per cent. Rising claims costs are a major driver, fuelled by the growing complexity of modern vehicles—particularly advanced driver assistance systems and electric vehicle components, which extend repair times and push up labour expenses.
In contrast, heavy motor and large fleet operators are enjoying relatively stable pricing. Insurers are offering incentives for strong risk management practices, especially where businesses use tools like GPS tracking and telematics to improve safety and reduce losses.
Contractors Plant & Equipment
The Australian insurance market remains most competitive for operators of well managed heavy plant and fleet. A growing number of underwriting agencies are in fierce competition. We stress the importance for fleet owners to weigh premium savings against the quality of coverage and the long-term reliability of their insurer to ensure sustainable protection.
Cyber Liability
The cyber insurance market is moving into one of its softest periods in years, with premiums declining across multiple industries. Although this doesn’t signal a widespread improvement in cyber resilience, it does mean more accessible and competitive insurance.
Underwriters are shifting toward external scanning and vulnerability assessments as distinct to disclosure via traditional proposal forms. This permits independent risk assessment coupled with reduced paperwork, and disclosure obligations for policyholders. This evolution is contributing to more robust, security focused policies, often paired with stronger incident response capabilities, helping organisations bolster their defences and respond more effectively to emerging cyber threats.
Management Liability
The Management Liability market continues to soften, with strong insurer appetite driving premium reductions of 10 to 25 per cent and broader coverage for policyholders that can demonstrate sound governance, financial strength, and effective risk management. However sectors exposed to insolvency, employment disputes, cyber incidents, and heightened regulatory scrutiny should expect to see more selective underwriting, tighter terms, or higher deductibles.
Key insurer focus areas include cyber related D&O and statutory liability claims, increasing regulator activity (particularly WHS enforcement), rising employment practices claims, and insolvency risk, alongside renewed appetite for crime and social engineering fraud cover where controls are strong. Policyholders are urged to carefully review exclusions, sub-limits, and definitions (especially for cyber), WHS investigations, employment liability, and online-transacted policies with a view to ensuring coverage remains fit for purpose despite attractive pricing.
Directors’ & Officers’ Liability
Market conditions for directors and officers remain favourable for now. While new market entrants still offer competitive pricing, established insurers are expected to tighten underwriting discipline and stabilise rates to avoid under-pricing risks. Premium reductions of the scale seen in 2025 are unlikely to continue, with D&O policies poised to be the earliest casualty of a hardening market, catalysed by increased regulatory scrutiny and the anticipated increase in Shareholder Derivative Actions (SDA’s).
We expect that rising insolvency rates and resultant losses are likely to dampen insurer appetite in 2026, coupled with the expected increase in SDA claims. A sustained increase in SDAs will lead to heightened uncertainty and capital strain for insurers, reinforcing cautious underwriting behaviour and ultimately contributing to a more restrictive D&O insurance market due to the implementation of higher premiums, reduced capacity, higher retentions, narrower coverage and the introduction of more onerous exclusions.
Expectations on governance and accountability will continue to increase in 2026, making strong risk management essential. Organisations that demonstrate robust ESG practices, solid cyber security, sound governance, and financial stability will be viewed more favourably by insurers whereas appetite will be reduced for those with weaker governance, limited independent oversight and aggressive corporate strategies.
Professional Indemnity – Financial Services Licensees
Insurers continue to show strong appetite for fund and asset managers with exposure to commercial property and equities. Confidence in CBD office assets has improved significantly as occupancy levels have stabilised, prompting insurers to re-engage with this segment.
Interest in residential property development remains limited, though businesses with a solid track record or demonstrated sector expertise are attracting increased attention from the market.
Professional Indemnity – Accountants
Practices with solid claims records and strong internal risk controls have secured premium reductions of around 7 to 12 per cent, while those with significant exposure to audit or R&D tax advisory work continue to encounter constrained insurer appetite. At the same time, Australia’s new sustainability reporting framework is creating additional pressures, prompting firms to build new capabilities and adjust to shifting regulatory expectations.
Professional Indemnity – Information Technology and SaaS
Insurers remain selective, rewarding those firms that can evidence strong privacy by design frameworks and incident response capabilities. Premiums for lower risk SaaS providers have seen modest reductions of up to 10 per cent, but those with high data sensitivity or US exposure have faced flat or slightly increased rates.
Professional Indemnity – Solicitors
Insurer appetite for solicitors’ top-up waxed at the 30 June 2025 renewal date, particularly for layers in excess of $30M. Active participation from both domestic and Lloyd’s of London capacity has helped firms obtain higher limits at more competitive prices.
Professional Indemnity – Property Professionals
Market appetite remains broad overall, consistent with our July update, but insurers continue to take a cautious stance toward strata managers, residential property managers, and businesses involved in off the plan sales. As a result, many insurers are introducing additional exclusions for bodily injury claims arising from property management activities.
To improve their position and access more competitive pricing, policyholders are encouraged to adopt differentiators such as software-based inspection tools or automated repair alert systems.
Construction Professionals
The construction professionals insurance market remains soft, with strong insurer appetite and ample capacity, particularly for SMEs, where competition is intense causing rates to continue to fall. Larger firms face a more mature market with fewer insurers, placing greater emphasis on coverage quality, insurer stability, and claims expertise. While capacity has improved across most disciplines, higher-risk areas such as high-rise residential, D&C, façades, certification, and complex infrastructure remain more difficult to place, and caution is warranted as newer entrants may exit the market as claims emerge. A return to harder conditions is expected within the next two to three years.
Meanwhile, external pressures, including tight construction margins, insolvency risk, regulatory reform, PFAS exposure, and major projects such as the Brisbane 2032 Olympics are increasing insurer scrutiny, particularly for fast-tracked projects and Project PI aggregation. Policyholders are advised to avoid over-reliance on contractor-arranged PI and consider principal-controlled cover. We recommend policyholders remain focused on policy quality and claims capability, given that competitive pricing in the soft market can mask coverage gaps and weaker insurer performance.
Transaction M&A and Contingent Risk
Rates have held steady, with underwriting practices and coverage positions largely unchanged.
Stronger domestic economic conditions in the latter half of the year, driven by easing interest rates and moderating inflation, appear to have supported an uplift in M&A activity, even against a backdrop of global uncertainty.
Looking ahead to 2026, the effects of renewed inflationary pressure and the possibility of interest rate increases remain to be seen. However, the expanding pool of private capital is expected to continue fuelling both private and public M&A activity.
Construction Material Damage
Conditions in the construction material damage market continue to improve, supported by increased insurer appetite, new market entrants, and returning capacity, leading to premium reductions of around 5 to15 per cent for well-managed, lower-hazard policyholders with strong claims histories. Competition is particularly strong in the sub-$10M turnover segment, while higher-risk activities, poor risk management, or adverse claims records are limiting improvements. Insurers increasingly favour proportional participation on projects, apply greater scrutiny to underwriting information and sub-limits, and remain constrained by shortages of experienced underwriters, contributing to longer placement timelines and variable service levels.
High-rise residential, infrastructure, and civil projects remain active but face heightened underwriting focus on experience, project timelines, insolvency risk, water damage controls, weather exposure, and latent conditions. Lloyd’s of London is playing a growing role, while regulatory reforms and interest in products such as LDI are improving insurer confidence in project quality. To capitalise on favourable conditions, policyholders must engage early, provide detailed risk information, prioritise strong risk and water management, and select stable insurers with proven claims performance, balancing short-term pricing opportunities against long-term insurance certainty.
Construction Liability
The construction liability market softened through 2025, with returning insurer capacity driving stronger competition, lower rates, broader coverage, and more flexible terms for well-managed risks. While conditions remain favourable heading into 2026, underwriting caution persists, particularly for high-risk trades and worker-injury exposures with exclusions for PFAS and silica often included as standard, leaving some risks uninsured. Although further rate reductions are expected in the near term, pressure on insurer margins and deteriorating loss trends suggest the current soft market may be relatively short-lived.
Key structural pressures include rising worker-to-worker and psychological injury claims, escalating construction and rectification costs, increased losses linked to modular and prefabricated products, and heightened scrutiny of “deemed manufacturer” liabilities for imported materials. To optimise outcomes, policyholders should strengthen contract governance, maintain strong documentation, enhance site-level risk management, and engage early and proactively at renewal. Demonstrating disciplined risk controls, continuous improvement, and stable insurer relationships will be critical as market conditions begin to shift.
Strata
The strata insurance market remains stable in a soft cycle, with returning insurer capacity favouring well-managed, well-maintained buildings outside high-risk zones, which may achieve flat or reduced premiums, while underinsurance remains a key risk due to rising construction costs outpacing CPI, making accurate valuations essential.
Regulatory reforms have improved transparency and governance awareness among Owners Corporations wherein there is now increased scrutiny of Strata Managers whilst growing private-equity investment in tech-driven strata platforms is accelerating digital quoting and claims but introduces data governance and underwriting transparency risks. Overall, proactive, data-rich risk presentation, supported by current valuations, maintenance records, and defect management is critical to securing favourable terms and adequate coverage.
Due Diligence
In 2026, insurance due diligence is expected to become a standard requirement in virtually all transactions. Conducting a thorough review of a target’s risk profile and risk management culture allows buyers to more accurately evaluate the strength and sustainability of the acquisition. It also supports valuation decisions and uncovers potential liabilities that can be managed through deal structuring or addressed via insurance transfer solutions within the Go Forward program.
The due diligence landscape for 2026 is shaping up to be more assurance‑focused than ever, resulting in a process that is increasingly detailed, rigorous, and compliance‑driven compared with prior years.
Continue reading our full range of market updates:
- Insurance Market Overview: January 2026
- Claims
- Workers Compensation
- Corporate and Multinational Risk
- Construction, Property and Development
- Financial Lines
