The insurance and reinsurance market over-reacted in the fourth-quarter of 2022 and now with property pricing softening across the board, Aon’s Joe Peiser, Chief Executive Officer of Commercial Risk Solutions, has said the broker would characterise this soft market as a “pricing correction.”Peiser explained in Aon’s latest Global Insurance Market Insights Report, that as the end of 2025 approaches, the market is “marked by opportunity for our clients” amid abundant capital and innovation in risk transfer.“Capital is broadly available, though more fragmented, and rapid technological advances are making risk transfer more creative, agile and targeted.While traditional insurance products remain the cornerstone of risk transfer, we are seeing increasing opportunities to strengthen protection through complementary solutions including parametric triggers, structured insurance and facultative reinsurance solutions, and captives,” Peiser explained.

He went on to explain that market dynamics are particularly competitive.Peiser said, “In Q3, the property and casualty market showed another quarter of competition for preferred risks, driven by ample capacity, easing conditions in the reinsurance market, and insurer growth ambitions.Local markets are attracting new entrants and seeing growing interest from reinsurers and international insurance markets, which is driving price competition, broadening coverage availability, and making oversubscription common for preferred risks.

“Amidst these otherwise buyer friendly trends, recent losses from Hurricane Melissa — one of the strongest Atlantic hurricanes on record — will likely cause a shift in Caribbean local and regional market conditions but are not on a scale that we believe would force a broad near-term shift in market pricing or capacity.” In property insurance markets, buyers saw double-digit decreases for preferred risks in several markets through the third-quarter of 2025, Peiser explained.Capacity and the weight of it across the insurance and reinsurance industry appears to be a key driver of the softening being seen.But Peiser and Aon believe this is simply the market reverting back to its mean, as they believe rates had hardened more than warranted.

Going into more detail on property market dynamics, Peiser said, “We see the softening in property insurance as driven largely by two years of profitability and the resulting retained earnings of insurers and reinsurers as opposed to a change in industry fundamentals.We don’t see loss activity easing, nor do we see new capital entering the traditional insurance and reinsurance markets.“This leads us to characterize the soft property market conditions as a “pricing correction.” We believe the property reinsurance and insurance markets over-reacted in Q4 2022 to loss activity at the time.” He continued to say, “Today insurers see property rates as still adequate, but with the current focus on capital discipline, it remains to be seen whether a continued slide would be sustainable in the intermediate term.

With this in mind, today’s buyer-friendly market conditions should be seen as an opportunity for buyers to future-proof their programs.” The market is now seeing oversubscription of large property programs and with treaty reinsurance competitive, abundant insurance-linked securities (ILS) and alternative capital, that does not seem likely to become less frequent.There do remain some capacity complaints for certain high-natural catastrophe exposures in property, Aon’s report explains.But some of these constraints are being offset by competitive market dynamics now.

Ample capacity and favourable reinsurance terms are serving to fuel double-digit rate decreases in property markets around the world, the broker said.Summing up the current buyer-friendly environment, Peiser stated, “Clients are seeing significant opportunities to strengthen their risk transfer programs, but it’s vital to recognize that the market is not monolithic.While competition is driving pricing down and coverage up for preferred risks, we’re also seeing continued volatility in loss activity, especially in property, cyber and U.S.

casualty.Now is the time for organizations to future-proof their programs and reinvest premium savings into long-term resilience.” If the 2022 spike in reinsurance prices and subsequent hard market was an over-reaction, then surely reinsurers should have been meeting their costs of capital prior to that? But they weren’t in all cases and most underwriting firms would say the hard market was required, to help them get back on a more balanced footing with the ability to make profits.Given how fast things are now softening and if that persists, it may eventually raise questions over the reinsurance sector’s ability to consistently meet capital costs over the cycle.

Which would also, in time, raise questions again about where the value in reinsurance is being apportioned and whether that’s a fair distribution of the market’s profits.As the property catastrophe reinsurance market seems destined to head back to pricing levels seen prior to the last hardening, which is currently most evident through the catastrophe bond market, ..All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance can be accessed online.

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