What’s driving the favorable cycle
AUCKLAND — insurers are riding a wave of favorable market conditions right now, with ample capacity, softer reinsurance costs, and stronger profits combining to create competitive premiums for buyers. The environment first took shape in mid-2024 and has continued through late 2025, with no signs of slowing unless a major catastrophe disrupts the pattern.
Here’s the thing: the insurance market is experiencing a benign claims environment that’s keeping loss ratios low and profits high. Despite California’s devastating wildfires early this year, which caused US$40 billion in insured losses, overall claims activity has been below average. The Atlantic and Pacific tropical cyclone seasons were quieter than expected, which has been a major factor in keeping reinsurers profitable.
Global reinsurers are reporting healthy margins around 17.7%, and that’s attracting more capital into the sector. In the first half of 2025, global reinsurance dedicated capital rose to US$805 billion — a significant increase that’s creating downward pressure on prices. For local insurers who rely heavily on reinsurance to manage their risk, lower reinsurance costs translate directly into lower operating expenses.
Why this matters for policyholders
Look, when insurers are making money and reinsurance is affordable, that’s good news for customers. Recent financial results show the pattern clearly: one major insurer saw premiums drop 2.6% but their insurance margin actually improved from 23.3% to 24.3%. That’s the kind of market dynamic that lets insurers compete on price while still maintaining profitability.
The Insurance Council reports that the industry’s average combined ratio — a key measure of profitability — improved dramatically from 97.9% in December 2023 to 78.6% in December 2024. Loss ratios dropped sharply across major sectors: commercial property fell from 133% to 58%, domestic building and contents from 85% to 51%, and motor vehicle from 74% to 62%.
“The market is in exceptionally strong shape right now, and that’s creating opportunities for brokers to negotiate better terms for their clients,” said Mark Thompson, regional risk advisor at Wellington Insurance Partners. “We’re seeing insurers willing to sharpen their pencils on both premium and coverage.”
What it means for businesses and consumers
Bottom line? Now’s an excellent time to review your insurance arrangements. With plenty of capacity available and insurers eager to write new business, buyers have leverage they haven’t enjoyed in years. Stress tests conducted by regulators confirm that insurers can handle even extreme scenarios — one recent test showed the market could pay all claims even in a magnitude 8.7 earthquake.
Frankly, market conditions like this don’t last forever. A single major catastrophe could shift the equation quickly, so businesses and individuals should take advantage of the current environment to lock in favorable terms. Engage with your broker early, compare options carefully, and make sure your coverage matches your actual needs — not just your budget.
The real question is how long this window stays open. Insurers are deploying capacity into new distribution channels and exploring technology-driven underwriting models, which suggests they expect favorable conditions to persist. But history shows that insurance markets can turn on a dime when unexpected events occur.
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