Tracking the trends
An exclusive market outlook report was released at the third annual Insurance News conference
By John Deex
The soft market is entrenched, according to Finity, with limited signs momentum will shift in the short term. The latest INFORM report, compiled by the actuarial consultancy and Insurance News, takes a detailed look at current conditions and where they’re heading.
Attendees at the one-day Outlook 2026 conference, held at Sydney’s Darling Harbour Doltone House in March, were given a printed copy of the report, and Finity principals Susie Amos and Pravesh Ponna – alongside Insurance News editor-in-chief John Deex – took attendees through the key findings in the first session of the day.
An audience poll asking how long the soft market will last revealed just 1% believe it is not a soft market; 14% think it will last less than a year; 59% say one to two years; 21% two to three; and 5% longer.
Last year the same question resulted in: it’s not a soft market (16%); under one year (7%); one to two years (42%); two to three years (27%); and longer (8%).
The Outlook event also featured an insightful panel on the critical issue of AI, moderated by Tata Consultancy Services’ Vincent Ofrecio and featuring TAL Australia GM of technology and delivery David Arthur, TCS chief technology officer for insurance Raveendra VVS, and Marsh’s Liberty Mudzamba.
A cyber session included QBE global head of cyber services Dominic Keller, who was joined by WTW director of cyber and technology for the Pacific Michael Parrant and MGA broking operations manager Trent Woodward.
Experienced insurance leader Jacki Johnson gave a candid speech tackling critical issues around risk and relevance, and Insurance Council of Australia CEO Andrew Hall spoke on major challenges facing the industry.
Other sessions included a panel on the future of broking, and presentations on workplace wellbeing, and claims.
The day concluded with the annual CEO panel, featuring AIG Australia CEO Kathleen Warden, Allianz chief GM of commercial and personal injury Julie Mitchell, Aon Australia CEO Kevan Johnston, and PSC CEO Ben Goodall.
The event was backed by gold partners QBE and Tata Consultancy Services, and sponsors Entsia, AAMC and Australia Underwriting.
A summary of the market outlook report follows, with the full digital version available on request.
Deep down
We’re currently “in the depths” of the soft market, Finity says, with conditions “entrenched” in commercial lines throughout 2025.
And we can expect more of the same this year. Finity forecasts further rate drops of 8%-12% in corporate property, up to 5% falls in strata, financial lines and cyber down 5%-10%, and standalone liability expected to reduce by up to 7%.
On the flip side, rates are tipped to continue to rise at 3%-5% in business packages and commercial motor, and personal lines are mostly on the up too, with home expected to increase 5%-7%, domestic motor 0%-5%, and compulsory third party 5%-10%.
Industry return on equity has been at the top end of the target range of 10%-15%, and Finity says this has attracted interest from new market players, including from overseas, which has increased competition and capacity.
“Soft market conditions with reducing rates have impacted underlying profitability, and we expect industry profitability to move towards the bottom end of the target range over the next 12 months – with some classes forecast to move closer to break-even and loss-making territory,” the report says.
Industry leaders told Insurance News a mixed story, with a marked difference between market conditions for SMEs and large corporates.
“It’s that globally priced business that tends to feel the biggest impact, and it’s the most volatile in pricing,” CGU and WFI chief executive Jarrod Hill says.
“In our SME space, we’re still getting very modest rate come through to offset some of the inflation impacts we see on claims there.” QBE group chief executive Andrew Horton says increasing competition in the Australian commercial market – particularly from managing general agencies – is making local business growth more challenging.
“They’re supported by London capacity. They are putting more money into the Australian delegated authority market and we see them competing with us,” he says.
But he doesn’t regard the market as being in the soft phase, with rates having weakened in parts of the portfolio from a starting point of very strong adequacy.
Finity says that two years into a deeply softening market it’s easy to wonder “how on earth rates continue to fall so steeply”.
And speculation is growing that we’re starting to see signs of an irrational market.
“What we now believe we are seeing is market players each engaging in strategies to defend and grow their portfolios, which collectively is leading to a seemingly irrational and unsustainable market,” Finity says.
Factors that contribute to irrationality include a top-line focus, a lag in recognising poor-performing portfolios, and cross-subsidisation between segments.
Finity outlines three potential paths for the soft market:
- Steep slide – significant rate reductions continuing at current levels before a quick turnaround in 2029.
- Controlled ride – moderate rate reductions taking an average five-year cycle and turning in 2031.
- Soft glide – rates quickly flatten but plateau for several years, requiring a major event to turn the dial.
When put to the audience in another poll, 40% of the audience said they expected a steep slide; 19% soft glide, 35% controlled ride and 6% none of the above.
“Our estimates currently suggest we might be soft for at least another three years,” Finity says.
“Of course, the weather and impacts from the geopolitical environment could shock the system and throw us a curve ball.”
Industry figures are quick to stress that underwriters are being disciplined and there are no signs of irrationality.
QBE’s Mr Horton says the impact of ever more capable pricing models is having an impact.
“It’s quite hard for underwriters to keep overriding a model that’s telling you you’re either overcharging or undercharging,” he says. “There’s more consistency, so the amplitude of the cycle is definitely getting less.”
Steadfast Group chief executive Robert Kelly – who has more than 50 years’ industry experience – says the troughs are not as deep as those he has seen before, and in the current market insurers are keeping an eye on inflationary pressures.
“I think the market’s pretty rational in Australia,” he says. “I’m not seeing any stupidity by the Australian insurers that write most of the business.”
Cyber risks and myths
The cyber premium pool in Australia is growing – Finity estimates it was at $700 million last year – but slower than expected.
“The biggest brake on cyber insurance growth isn’t capacity – it’s uptake, particularly for SMEs.”
Despite all the hacking horror stories, many small businesses remain uninsured, with cost, complexity and lack of understanding of risks and cover cited as the main barriers.
This is despite insurers “throwing everything” at improving coverage and wordings, and reducing premiums for the third year running. Finity says the cyber protection gap is at 90% and will widen further, with AI use creating more complex risks.
“As innovation accelerates, exploitation has followed and heightened cybersecurity (and insurance) is required to protect against this new risk environment.”
Finity says we are yet to witness a “truly catastrophic cyber event”, but it’s increasingly likely.
It says the government needs to strengthen cybersecurity and collaborate with SMEs and the insurance industry – which also needs to adapt by improving products and advice.
Industry players tell Insurance News that insurers are “getting antsy” after significant investment.
“We’ve got the policies, we’ve got the enhancements, we’ve got the capital, but the policies aren’t coming in,” specialist cyber broker Andrew Brett said.
“The market is nowhere near where I think it should be. The pricing is great for what you get, but the story is missing.”
The Insurance Council of Australia says improving the cyber literacy of SME owners is key, and QBE’s global head of cyber services Dominic Keller warns cyberattacks “happen at the most inconvenient times – weekends, nights, holidays, basically when the A-team is off duty”.
Leaders who have not seen a cyber breach simulation are often shocked at how many critical business decisions are required in a high-pressure situation, Mr Keller says, and QBE’s exercises “expose the chaos that follows a breach, surfacing gaps in planning”.
The psych claim crisis
Rapid growth in psychological claims is placing sustained stress on a range of insurance classes, Finity says, with life, workers’ comp, public liability, medical malpractice and compulsory third party all affected.
And Australia is feeling the pressure more than other countries, partly as a result of the legal and societal context.
“The legal framework for psych injuries, including nervous shock and secondary psychological harm, is relatively well developed, which expands potential exposure across liability and statutory classes,” Finity says.
“At the same time, there has been increased awareness of mental health and broader social acceptance. Together, these factors mean the impact of psychological injuries is likely to be worse in Australia than in some comparable jurisdictions, even where underlying prevalence may be similar.”
So what can we do about it? Finity argues continued premium escalation is not sustainable, and prevention – while desirable – is difficult.
“This leaves legislative and policy reform as the lever with the greatest potential impact,” it says.
“History suggests that sustained cost pressure in workers’ compensation and motor injury schemes eventually leads to reform.”
Industry players agree that psychological injury has become one of the most serious and fast-growing issues.
Brianna Cattanach, Allianz national manager for mental health strategy and delivery, says the complexity of psychological claims makes them particularly challenging.
“They are often harder for workplaces to manage and tend to have longer recovery pathways,” she says.
EML Management chief executive Don Ferguson says getting the fundamentals of case management right remains essential.
“Without meaningful intervention, mental injuries will consume an increasing share of scheme resources, driving higher liabilities and increasing pressure on employer premiums.”
