Property insurance 2026:Pricing pressure, smarter risk and a changing market

We're in a soft market cycle, we're seeing property pricing in a downwards trajectory currently. Yes Paul, it's a great time to be a buyer in the market. The world has never been a more uncertain place. Hello everyone, welcome to Insurance Business TV and welcome to another our brand new broker-led power panels for 2026, this time focused on property insurance. We've brought together some of the leading experts in the space to talk about the latest developments, including Lucy Fitzgerald, Partner in Real Estate at Gallagher, Justin Warrants, Vice President Global Real Estate at Lockton and stepping in for Mike Ward, Karen Allen, Managing Director of Property and Casualty UK and Board Member at Bridge Specialty International. So welcome everyone and with reinsurer capital expanding and double digit adjusted rate reductions achievable for some catastrophe placements, I'd love to get your views on how this is reshaping property pricing across the UK. Justin, I'll start with you. Good morning Paul, I'm firstly delighted to be joining this panel this morning, so thank you very much for that. I'd say that we're seeing we're in a soft market cycle, we're seeing property pricing in a downwards trajectory currently. Insurers have announced their profitability in their year-end results which is very very positive and they're for supporting this position of downward spiral. Most of the large insurance carriers have reported their combined operating ratios of 85 and below and therefore they're under pressure to write similar good business in order to drive competition in the markets and which also means that insurers want to really defend their existing books to prevent business hitting the markets simply because they're frightened that they may lose that business or it may be decimated. Okay and Lucy from your perspective would you say then it's a good time to be a buyer in the insurance market? Yes Paul, it's a great time to be a buyer in the market as Justin's just outlined. There's a lot of capacity in the market right now and clients are being able to take advantage of excellent premiums and also pushing limits across their portfolios and as a result we're seeing a lot of programs being consolidated and brought into the London market right now. We're also seeing insurers moving away from maybe previously looking at rate adequacy towards more flexible sort of pricing adequacy points when it comes to premium raising. So this downward momentum Karen has it been going on for a while now? Really since 2023 rates have been consistently coming down in the UK property space and that is continuing this year also. Where it's going to end we all still don't quite know because there really is a glut of capacity so you have a lot of insurers wanting to win and retain business so this is a great time for customers to be buying at the moment to take advantage of this. Well with market conditions softening across many lines I guess Lucy we need to be careful that perhaps we don't get our fingers burnt again avoid repeating past property cycle losses. So what disciplines are you seeing carriers maintain or introduce? Yes it's true to say Paul that during the soft market cycle typically we see insurers have less requirements for certain underwriting information however we would always recommend that the best presentations to market include a comprehensive information on construction, occupancy, fire protection details to get the best and most accurate terms out of the market. That said for those risks that are seen by insurers as being slightly higher or a bit more nuanced or newer in approach that we will find a little bit more caution being deployed and so some certainly around flood underwriting particularly towards surface flood exposure insurers we're still seeing slightly higher excesses and also rates towards those properties that are in high flood impact zones and those risks that are unoccupied as well where we have seen malicious damage or theft of metal claims that have impacted insurers ratios and there's still a certain amount of caution around modern methods of construction so CLT or timber and some newer technologies that have not yet been proven such as blue roofs green roofs that kind of thing. I imagine as well Karen that this has put just increased emphasis on having the right value insured. Yes I mean I think that's really a crucial point here so we are still seeing the use of surveys engineering backed cost indices to make sure the correct total insured sums are in play and with inflation being right and it couldn't be more important so whilst to Lucy's point many of that there are some more relaxed underwriting approaches which is completely typical of a soft market I think the look towards ensuring the correct values are insured has been maintained in this cycle. And just in from your perspective would you describe the insurers as being aggressive with their pricing right now? Yeah very much so Paul you know they're aggressive on their pricing they're being quite punchy on their line sizing as well which is typical of a soft market certainly the previous longer soft market cycles that we were in if anything more so than ever. What we are seeing is more involvement from the insurance each carrier's risk control teams particularly for quirkier risks so things like involving lithium battery storage as an example positively they are quite proactive with regards to developing guidance for clients around EV charging PV panel installation and they're fairly hot on on void units currently especially as the news is reporting the substantial increases in break-ins and also theft in the UK and you know void management is always going to be very very important but more so now than ever. Well let's talk about the news on an even wider scale if we can. The time of recording we're about a week or so into the US-Israel-Iran war so Karen from your perspective how are supply chain volatility and geopolitical risk which of course are now top global risk concerns how are they influencing the property insurance market? The world has never been a more uncertain place and the recent events in Iran which are pushing energy and commodity prices up are only going to have a knock-on effect for materials or for logistics for delivery times where this is all just going to further increase claims inflation and it's off the back really of a continued Ukrainian war the Panama Canal drought which occurred a few years back so the world is just so uncertain and this pushes claim cost and uncertainty so insurers how they react to these uncertainties is really key for their future profitability and how they're going to manage these risks. Yeah and Justin we just can't ignore events in the Middle East right now can we? Absolutely not and you actually alluded to this Paul just before you know the importance of having adequate risk values giving the ongoing inflation a bill cost which is caused by the supply chain and the volatility that exists here but also things like you know political violence in Europe it's monitoring which groups are on the the strikes riot and civil commotion perils as well as seeing an increase in breaking and theft there's also scrutiny around tenanted buildings where there could be these could be seen as potential targets by many political groups and you know active right-wing activism it could cause either you know liability or physical damage to those assets. And Lucy from your perspective is it possible that we're at risk of some over exposure to certain markets right now? Yeah I mean looking beyond just the real estate market but into the property markets insurers you know are realising and anticipating that they may have the exposures to particular geographies or particular sectors where they where they may need to be more prudent in their underwriting and one example of that would be the over dependence of Taiwan and the semiconductor industry for example so we are seeing in terms of insurers underwriting proposals that they are wanting to know definitely tier one and tier two suppliers so they can factor that into their underwriting but also being more restrictive around unnamed suppliers as well wanting to know exactly where where any suppliers are coming from in the world. And I suppose that the pressure is on insurers right now as well isn't it to to anticipate rather than react to these evolving risk landscapes so Justin are there any predictive data or modelling tools that you think are proving most valuable for property portfolios this year? Yeah so the main focus continues to be around catastrophe perils and also future proofing assets really based on predicting their exposure to risks such as flood but we're also seeing the innovation and evolution of AI being built into these models so the ability to do sampling and sort of risk scoring across a larger portfolio there are a number of businesses now who will track organized crime gangs and individuals around property owners just to make sure that there is proactive risk management particularly around the out-of-town properties. We ourselves have locked and released our AssetConnect product at the beginning of January that's the black box of real estate essentially this will plug into if you think about a large office assets it will plug into their building management system and essentially then picks up all of the data points within that and you can then pull out really useful information such as energy performance and leak and other perils really provides a good risk management tool so investors and owners and managing agents can get ahead of of the risk. Just to go back to Justin's point around catastrophe losses there Lucy I mean CAD modelling and portfolio intelligence really has come to the fore hasn't it? Yes absolutely I mean not only can insurers now by the utilization of their own tools and by incorporating other third-party model modelling tools predict social hazard mapping and natural catastrophe mapping for right now they're also looking particularly in the case of flood at what the effects of climate risk may have on their property portfolios and that is going to be able to assist in determining underwriting strategy for the future and also treaty treaty reinsurance buying as well. And I don't think we can complete a conversation on any aspect of insurance right now Karen without talking a little bit about AI that's having a huge influence isn't it? Yes yes and I think as well as how lifetime accumulation analytics are used but linking in with AI to actually future predict some of the peril scorings and in order to really get you know because the crux of this is getting accurate claims costings for the going forward in all of the uncertainty and inflationary times we're in so looking at how AI is really going to shape some of this modelling in the next few years I think it's an extremely exciting time and you plug in as well some satellite and drone analytics for sites you know this is I mean we're right on the crux I think of a modelling revolution in the insurance market. Love the use of the word revolution but let's talk about 2026 a little bit more just one final question to throw at each of you if I can which is just how are you seeing primary property carriers rethink their retention strategies and indeed their program structures this year so far Lucy let's get your thoughts. Yes I mean and insurers are certainly wanting to maintain their retention ratios so we are seeing that incumbent insurers are willing to give significant reductions in order to keep the business that they already have it's by far preferential to keep existing clients rather than buying a new business they are also flexing the amount of capacity that they can put forward towards risks whereas before we'd seen a lot of programs that were scheduled whereas insurers might now wish to offer higher line sizes and one of the other strategies that they can easily and are doing so at the moment is by offering existing clients or new clients long-term agreements and that's where a client accepts a certain set of terms over a three-year period or two or three-year period and those terms will be maintained by the insurer at each annual renewal providing that the loss ratio isn't breached. And Karen from your perspective is coverage being pushed right now? Most certainly and this is very much for the customer's advantage so where you may have had lower sub-limits for certain coverages in policies they're being pushed out there's bespoke coverages for specific risks and customers being offered because essentially insurers their rates down they still want to grow so they don't want to lose customers but I think it's doing things other than just slashing rate which actually is meaningful and they're really adding the value to retain the customers and for the customers benefit. So just to wrap up are you in agreement with what Karen and Lucy are seeing here? Yeah absolutely Paul very consistent theme across the three of us which is positive we're largely seeing insurers being very proactive in providing competitive premium options really to prevent as Lucy said any doubt from you know clients causing coming out to the market with the portfolio as they really recognize that premium savings could be significant if they do get out in the markets. So we're seeing more flexibility in their line sizing increasing where possible in order to reduce the number of people who could really compete to lead those real estate portfolios and similarly follow market insurers they're also bolstering their lines line sizes they're making it harder for brokers to remove them from their programs but otherwise they really continue to be quite competitive as Lucy said you know offering long-term agreements really to incentivize clients to remain with them for the long term in which case they are usually trading large savings now for more stability over the next few years. Obviously there is going to be plenty to watch in the property insurance space during 2026 and thankfully this panel will be back every quarter to talk about all of the latest developments so until then keep it right here on insurance business tv