A notable market softening or a temporary change?

A recent AON report (Q2 2025 UK Insurance Market Outlook | Aon) suggests that the first two quarters of 2025 have displayed a notable softening in the market, offering increasingly favourable conditions for buyers, with a general reduction in pricing in the UK insurance market between 10% and 20% over Q2. 

This, following the similar softening trend throughout 2024, in theory at least, offers increased opportunities for insurers and insureds alike, with the latter able to better negotiate their policies (and gain additional benefits such as expanded coverage), and for the former as they seek to explore new lines of business (and/or the possibility of reinstating coverage lines that have been withdrawn in recent years). 

A trend certainly seems to be emerging, but in these uncertain times, we will be watching closely to see if it continues.

The AON Report

The AON report suggests that further softening of the market over Q2 2025 is largely attributed to increased insurer competition and new capital entering the system faster than it is absorbed by losses, resulting in increased underwriting flexibility and reduced premiums. 

Some notable observations which may interest our clients:

Property Insurance

The property market remains competitive, with average prices down between 15% and 20%. Increases in layers or limits are being negotiated at incredibly competitive rates and requests for expanded cover are being responded to positively. 

The area in which insurers are exercising particular caution is naturally catastrophe risks, due to the increasing unpredictability in weather patterns. There is a shift from relying on historical data as a predictor of future loss to instead modelling the impact of climate risks.

It will also be interesting to see how matters such as the recent suggestion that government needs to plan to improve housing stock to accommodate an average two degrees temperature rise will be acted on and how this in turn will impact this area.

Professional indemnity insurance 

The professional indemnity market – which has felt the general hardening of recent years as much as others - has encouragingly also seen a softening in Q2, with rates reducing between 10% to 15% for major multinationals and from 10% to 25% for corporate/mid-market. 

There has been an increase in competition amongst insurers, resulting in a continued expansion of breadth of coverage and fewer exclusions for insureds. 

These conditions are due to continue for the remainder of 2025. For those involved in the construction space, however, caution should continue to be given to the developing law arising out of the Building Safety Act 2022 and extended limitation periods: it seems to us not beyond conceivability for a more fluctuating approach in this space. Time will tell.

Cyber insurance market 

Despite the prevalence of cyber incidents in the media, the cyber insurance market remains soft. The area remains a significantly underinsured area, with the everchanging nature of technology and AI providing uncertainty within the area. 

Insurers seem to continue to offer competitive rates and broad coverage, especially for insureds with strong cyber hygiene and risk management protocols. 

Our expectation is that this area will be one to watch with interest as business continue to adapt to ever changing demands. We have no doubt that many businesses will therefore want to proactively explore their options as the cyber market and threat of cyber attacks continues to coterminously evolve. For those interested in this area, Weightmans’ specialist cyber business - CyXcel – stands ready to assist.

Construction insurance 

For traditional standard construction, rates appear to be continuing to decrease. However, for firms involved in more complex engineering projects, underwriters are being more cautious and pricing remains flat. 

Looking ahead to the rest of 2025, an increase in capacity into the market could result in more competitive conditions. This will not, however, detract from the importance of robust risk management when determining the right level of coverage needed.

The impact of supply chain inflation of recent years remains an ever present factor, and again this appears to us an area where those involved in this space should keep a cautious eye on.

What does the future hold?

Currently there appears to be general optimism in the market that the softening trend we have seen will continue over the next 12-24 months. 

If this is so, then insurers will presumably be incentivised to be proactive and adjust their offerings to these market conditions. However, as we saw in the early 2010s, changing geopolitical and economic factors can disrupt matters very quickly.

From our discussions with insurers, we anticipate yet more focus to the already dominating issue of the onward use of technology and, in particular, AI. Along with the expected automation of as many manual tasks as possible, through the use of AI, it will also be interesting to see how technology (and in particular AI) begins to shape the way in which prediction models work to adapt to – it seems – ever more varying global factors which can impact the market.

We would be interested to hear whether insurers are already starting to see evidence of this in their pricing practices and whether they feel this will allow them to better control the trajectory of market conditions moving forwards, or simply allow them to act more swiftly to them. 

Another area we will be keeping an eye on is whether the increased presence of MGAs in recent years continues. MGAs of course have the benefit of being able to react to and better hedge the risks of diverse and changing market trends. Whilst their increased presence has been credited by some to the harder market seen in recent years, what seems to us yet to be seen is whether their increased presence has caused and/or contributed to the recent softening, or indeed whether their continued growth has provided some additional comfort to allow such softening to continue, despite the ostensibly continued global instability, at least in certain areas. Again, this remains an area of interest which we will be following closely.