Breaking the Cycle: How Smart Underwriters Protect Premium Integrity in Soft Markets

Soft markets have a way of seducing even the most disciplined underwriters into short-term thinking. The phone rings. The broker needs terms. The competition is slashing rates. The urge to flex pricing or relax terms in order to retain or win business feels justified under the banner of ‘relationship management’ or ‘market positioning.’

For those of us who have lived through the last two hardening cycles—whether it was the D&O market collapse of 2019, the PI fallout in construction and financial services, or the cyber mispricing wave of 2021—the scars are still fresh.

In today’s soft market, pricing pressure is intense, and the temptation to chase top-line growth at the expense of disciplined underwriting is palpable. However, the industry has seen—time and again—the costly consequences of sacrificing long-term premium adequacy for short-term wins.

This is particularly acute in Financial Lines, where claims are inherently long-tail, complex, and often impacted by societal, economic, and regulatory trends beyond an underwriter’s control.

Historic Lessons of Portfolio Damage from Soft Market Pricing:

• D&O—The Late 2010s Soft Market Crash:
  Between 2015 and 2018, the D&O market saw an influx of capacity, aggressive new entrants, and over-competition, particularly in Australia, the US, and UK markets. Premiums were discounted by up to 30-40% despite increasing exposure to class actions, regulatory crackdowns (especially in ESG and cyber governance), and an uptick in securities litigation.
  When losses finally materialised, they hit hard. The Australian D&O market alone experienced average loss ratios exceeding 150%, triggering a violent hard market correction from 2019 onward, with rates tripling in some sectors, drastic withdrawal of capacity, and retroactive tightening of terms.
  The result? Damaged client relationships, a battered reputation for the insurance sector, and portfolios that took years to recalibrate.

• Professional Indemnity (PI)—The Construction and Financial Services Wreck:
  During the mid-2010s, global PI markets, especially for construction, engineering, and financial services sectors, suffered from underpriced policies despite clear market signals—complex litigation, insolvencies, and regulatory risks were rising.
  By 2019, many portfolios reported combined ratios over 120%, with PI insurers facing multi-million dollar settlements on policies written on razor-thin margins. The long tail nature of these claims meant that even years after a policy was written, losses ballooned well beyond expectations, further eroding the capital adequacy of carriers and forcing portfolio exits.

• Cyber Insurance—The Emerging Risk That Was Mispriced:
  In the early 2020s, cyber insurance was often treated transactionally, with minimal pricing for ransomware, business interruption, and supply chain exposures that later exploded in severity. Many portfolios written between 2018-2021 are now loss-making due to ransomware-as-a-service trends and double extortion tactics, which were grossly underestimated during the soft pricing phase.

The Commercial Cost of Short-Term Thinking

When underwriting decisions are purely transactional—focused on rate discounting, broadening terms, or writing ‘headline premium’ deals without proper technical underwriting—the cost is always deferred, but never avoided.

Loss ratios surge. Portfolios bleed. Capital becomes restricted. And insurers are forced into reactionary hardening cycles that erode broker and client trust.

Underwriters and portfolio managers who adopt a stewardship mindset, focusing on premium adequacy, risk selection discipline, and data-led dialogue with brokers and clients, will be the ones who weather the cycle profitably and sustainably.

Premium adequacy is not a defensive stance—it is a commercial strategy for longevity.