Insurance markets are never static. For Australian businesses, the ebb and flow of insurance pricing and availability—known as the underwriting cycle—can mean the difference between affordable coverage and a scramble to secure protection. As we head into 2025, understanding this cycle is more important than ever for business owners, CFOs, and risk managers across the country.

What Is the Underwriting Cycle?

The underwriting cycle is the recurring pattern of ‘hard’ and ‘soft’ market conditions in the insurance industry. In a soft market, insurers compete aggressively, premiums are low, and coverage is broad. In a hard market, premiums rise, underwriting criteria tighten, and it becomes harder to get comprehensive cover. These cycles are driven by a mix of economic trends, claims activity, regulatory changes, and global events.

• Soft Market: Low premiums, easy access to coverage, increased competition among insurers
• Hard Market: High premiums, stricter underwriting, less capacity for risk, and sometimes exclusions on certain covers

Historically, these cycles last anywhere from two to ten years, but global volatility and climate-related risks are making cycles less predictable. The cycle impacts all lines of insurance—property, liability, professional indemnity, and more.

What’s Driving the Cycle in 2025?

The Australian insurance market is experiencing a late-stage hard market in 2025. This is fuelled by several factors:

• Extreme Weather Events: Recent floods and bushfires have led to record claims, putting pressure on insurers’ balance sheets.
• Global Reinsurance Costs: With reinsurance (insurers’ insurance) premiums rising globally, local insurers pass these costs onto customers.
• Regulatory Changes: APRA’s 2024/25 updates on capital adequacy and risk assessment are making insurers more cautious, especially in high-risk sectors.
• Inflation: Rising costs of materials and labour are driving up claims costs, particularly in property and motor insurance.

For example, a regional manufacturer in Queensland saw its property insurance premium jump by 30% in 2024 after a string of severe storms, despite no major claims. Meanwhile, professional indemnity premiums for tech startups remain elevated, reflecting global trends in cyber risk and litigation.

How to Navigate the Cycle: Practical Strategies for 2025

While businesses can’t control the underwriting cycle, they can prepare for its effects. Here’s how to stay ahead in 2025:

• Start Renewal Discussions Early: Engage with your broker months before your policy expires. This gives you time to negotiate and explore alternative insurers.
• Invest in Risk Management: Demonstrating proactive risk controls—like updated fire safety systems or robust cyber security—can help secure better terms.
• Consider Higher Deductibles: Taking on more risk via a higher excess can reduce your premium, but ensure it’s affordable for your business.
• Review Policy Coverage: In a hard market, you may need to prioritise essential covers and adjust limits to manage costs.
• Build Strong Insurer Relationships: A proven claims history and open communication can make your business a preferred risk, smoothing renewals even in tough markets.

In 2025, many brokers report insurers are rewarding clients who invest in resilience measures—such as flood mitigation or employee safety programs—with more competitive quotes.

The Outlook: Will the Cycle Soften Soon?

Many industry analysts predict the hard market will persist into late 2025, particularly for property and liability lines. However, as claims stabilise and new capital enters the market, competition may increase and premiums could ease in some sectors by 2026. Tech-driven insurers (“insurtechs”) are also starting to shake up the market with more flexible offerings, though their impact is still limited outside major urban centres.

For now, the key is to stay informed, plan ahead, and treat insurance as a strategic investment—rather than a last-minute expense.