Editorial: Insurance cycle remains in motion

Every few years — usually when insurance prices are peaking — industry executives often wonder aloud: Is the traditional insurance cycle over? The thinking goes that the market has become more stable, more data-based and less prone to the sharp rate swings that have long frustrated risk managers.

Recent reports, however, suggest that anyone hoping for such a simplified world may be disappointed. In the past few months, property insurance and reinsurance rates have dropped sharply in some areas.

Still, while this may reflect the familiar pattern of prices hardening then softening, significant changes are reshaping the market from top to bottom.

At the upper end, catastrophe bonds — once a niche area of the reinsurance market — are setting new records. Issuance in the first half of 2025 almost surpassed the total for all of 2024. While still small compared with the broader market, this added layer of risk transfer is giving insurers more flexibility in their own risk management. Corporate buyers may see indirect benefits in more options and competition.

Further down the insurance chain, the excess and surplus lines market is not just holding steady but expanding, despite falling property rates. Continued increases in liability pricing drive some of this. Regardless, there appears to be a lack of migration back into the admitted market — a shift that typically follows a softening in rates.

Market insiders suggest several possible reasons: challenging risks that fit better in the E&S market’s flexible framework, the sector’s growing acceptance as a mainstream option, or perhaps simply a lag before the old patterns reassert themselves. Next year’s data will provide a clearer picture.

Even closer to home for risk managers, captives are also reflecting this nuanced environment. Over the past several years, managers of these alternative risk transfer vehicles have seen steady growth in retained property risks. As market rates fall, some captive owners will undoubtedly return to the commercial market, but others will have acquired a lasting preference for the control, stability and customization captives offer.

Buyers also can access other alternatives directly or through a captive, including parametric insurance products, which they can use to expand or reinforce their programs.

For risk managers, the takeaway from all this is that the market’s moving parts are becoming increasingly complex. Capital markets, nonadmitted insurers and alternative risk vehicles are exerting greater influence, and their interplay can be used to a buyer’s advantage.

The cycle clearly remains with us, but it’s now part of a bigger, more intricate insurance ecosystem. Understanding those dynamics and knowing how and when to take advantage of them will be as critical for risk management success as trying to predict the next turn in rates.