Market Summary H1 2026

Key Takeaways

The Australian commercial insurance market is in a clear softening phase as the first half of 2026 nears its end. The Pacific region recorded the steepest premium decline of any global market in Q1 2026, with overall commercial rates falling approximately 12%. Conditions are favourable for well-managed businesses across most lines, though long-tail exposures, loss-affected risks, and structurally complex sectors continue to attract more restrained underwriting.

• Property: Double-digit reductions available on loss-free corporate and mid-market risks; catastrophe-exposed and loss-affected accounts face greater constraints
• Casualty: 5-10% reductions common on well-presented accounts; social inflation remains a medium-term headwind
• Professional Indemnity: Softening across most professional sectors with selective firmness in high-risk verticals
• Management Liability: Stabilising after significant reductions; regulatory and governance pressures emerging
• Cyber: Continued premium reductions of 5-12%; strict security controls remain non-negotiable underwriting requirements
• Emerging Risk: Psychosocial workplace regulations now active across all Australian jurisdictions, with direct implications for Workers Compensation, EPL, D&O, and Statutory Liability

In the Spotlight

This edition highlights two employee benefit insurance options and an innovative risk transfer solution that are increasingly relevant for Australian businesses.

Become an Employer of Choice with Insurance Benefits

Attracting and retaining the best people requires more than competitive salaries. A comprehensive employee benefit strategy provides meaningful support and protection to your team, helping your business stand out, boost employee engagement, and strengthen your brand.

Whether you purchase group policies that automatically cover all employees or provide your team access to quality products at competitive premiums, we can provide options for you to consider. Two of the most popular employee benefit insurance options are outlined below.

Personal Cyber Insurance

As technology becomes increasingly embedded in everyday life, it introduces new risks into homes and families. Personal cyber insurance covers your employees' entire household against the threat of a hack, virus, or cyber harassment.

Cover typically includes:

• Cyber extortion
• Identity theft
• Cyberbullying and cyberstalking
• Hacking and crimeware
• Personal financial loss
• E-reputation repair costs
• Wage replacement costs
• 24/7 incident response hotline and support

This product can be purchased as a group policy covering all employees, or made available for employees to purchase their own standalone policy.

Leisure Travel Insurance

Time away from work is essential for maintaining energy, creativity, and overall wellbeing. Leisure travel insurance provides essential protection for your employees and their families when they travel.

Cover typically includes:

• Medical and repatriation expenses
• Emergency medical and dental expenses
• Cancellation and curtailment expenses
• Lost, stolen, or damaged luggage
• Accidental death
• Personal liability
• 24/7 emergency assistance

This product is usually made available to employees to purchase at a discounted price when required. It can also be purchased as a group policy subject to the size of your employee base and other qualifying criteria.

Parametric Insurance

Parametric insurance is a type of cover that provides a pre-agreed payout when a specified, objective trigger is met - such as a defined wind speed, rainfall level, or earthquake magnitude - rather than based on assessed physical damage. Because payouts are driven by independently verified data, claims are settled quickly and without loss adjustment, providing rapid liquidity after an event.

Parametric solutions are particularly useful for:

• Covering catastrophe deductibles on traditional property programs
• Bridging gaps where conventional insurance is constrained or uneconomical
• Providing certainty of payout timing for business continuity planning

Growing use of parametric and structured risk transfer solutions is a notable trend in the current property market, particularly for catastrophe-exposed portfolios.

Emerging Risks

Psychosocial Workplace Regulations

All Australian jurisdictions have introduced strengthened work health and safety (WHS) regulations requiring employers to proactively manage psychosocial hazards. These include excessive workload, poor role clarity, bullying, harassment (including sexual harassment), fatigue, violence, and exposure to traumatic events. The reforms clarify that psychological health must be managed using the same risk management approach as physical hazards.

Under these regulations, persons conducting a business or undertaking must identify psychosocial hazards, assess associated risks, implement control measures, and regularly review their effectiveness.

Business Risk Implications

The regulations have direct implications across several core business risk categories:

• Legal and regulatory risk: Failure to identify and control psychosocial hazards can lead to regulatory investigations, improvement or prohibition notices, enforceable undertakings, prosecutions, and significant fines.
• Employment risk: Poorly managed psychosocial hazards increase claims of bullying, harassment, discrimination, unfair dismissal, and breaches of the employer's duty of care, which can escalate into formal disputes or litigation.
• Financial and operational risk: Psychological injuries are typically long-tail in nature and more costly than physical injuries. They can result in higher insurance premiums, prolonged absences, decreased productivity, and legal action.
• Reputational and ESG risk: Psychosocial harm, particularly harassment, burnout, or unsafe cultures, can attract regulator attention, media scrutiny, union action, and brand damage.
• Governance and leadership risk: Boards and senior management are now expected to demonstrate active oversight of psychosocial risk, with failures increasingly framed as systemic governance weaknesses rather than isolated HR issues.

Insurance Lines Affected

Property

Market Overview

• Australian market continues to be in a clear softening phase after several highly profitable years
• Soft conditions most evident in mid‑market and corporate commercial lines
• Abundant capital, strong competition, and favourable recent loss experience driving rate pressure
• Claims inflation and climate exposure remain structural headwinds to long‑term profitability

Insurer Appetite

• Broader appetite for well‑managed, loss‑free, data‑rich risks
• Continued selectivity for cat‑exposed regions and higher‑risk occupancies
• Underwriting discipline remains, particularly where price adequacy is questioned
• Risk quality, valuations, and data transparency are key differentiators

Capacity and Reinsurance

• Ample global and domestic capacity, including strong Lloyd’s participation
• Favourable reinsurance conditions supporting primary market competition
• Cyclone Reinsurance Pool continues to support northern Australia (household, strata, SME)
• Excess capacity remains a key driver of pricing softening

Premium Trends

• Double‑digit reductions common on loss‑free corporate and mid‑market property risks
• Pricing more restrained for SME, personal lines, cat‑exposed, or loss‑affected risks
• Outcomes increasingly segmented by class, size, geography, and loss profile

Market Trends

• Growing use of parametric and structured risk transfer solutions, particularly for cat risk
• Increased focus on risk engineering, loss mitigation, and valuation accuracy
• More granular catastrophe modelling, with heightened focus on hail and flood

Challenges and Emerging Risks

• Severe convective storms and hail now major loss drivers
• Ongoing claims severity inflation driven by materials, labour, and repair costs
• Affordability and underinsurance remain issues in high‑risk regions

Regulatory Oversight

• APRA prudential changes effective 1 January 2026
• Continued regulatory scrutiny on climate risk, governance, and data quality
• ACCC maintaining focus on affordability and pricing outcomes

Strategic Considerations

• Opportunity in 2026 to secure pricing relief and stable capacity
• Accurate valuations and evidence of risk improvement remain critical
• Consider layered programs, higher retentions, or parametric cover for cat‑heavy portfolios

Outlook

• Buyer‑favourable conditions expected through 2026, barring major loss events
• Softening unlikely to be permanent due to inflation and climate pressures
• 2026 presents a key window to stabilise programs ahead of the next cycle shift

Casualty

Market Overview

• The Australian casualty market is softening in 2026, with increasing competition following several years of rate hardening.
• Improved insurer profitability and stable loss development are driving more flexible underwriting.
• Despite easing conditions, the market remains disciplined, particularly for long‑tail and complex liabilities.

Insurer Appetite

• Insurer appetite has broadened materially, especially for well‑governed, loss‑free accounts.
• Increased willingness to compete on both pricing and structure, including multiline placements.
• Selective caution continues for structurally challenged sectors (e.g. NDIS, childcare, construction), though even these risks are seeing more insurer engagement than in prior years.

Capacity and Reinsurance

• Primary casualty capacity is abundant for most sectors.
• Reinsurance markets are stable and supportive, with no material constraint on capacity deployment.
• Excess layers are increasingly competitive, with lower attachment points available in some cases.

Premium Trends

• 5–10% reductions common on loss‑free and well‑presented accounts.
• Greater willingness by insurers to negotiate expiring terms, including excesses and coverage enhancements.
• Long‑tail and loss‑affected portfolios continue to attract firmer outcomes, though increases are more moderate than in previous years.

Market Trends

• More aggressive competition on primary layers, particularly public and products liability.
• Growth in limit expansion and layering strategies as pricing becomes more efficient.
• Increased focus on portfolio optimisation rather than pure rate‑driven underwriting.

Challenges and Emerging Risks

• Social inflation remains the key medium‑ to long‑term concern, tempering the pace of softening.
• Litigation funding, latent injury exposure, and evolving duty‑of‑care standards continue to influence reserving assumptions.

Regulatory Oversight

• Ongoing APRA focus on reserve adequacy and claims data quality, particularly for long‑tail lines.
• ASIC scrutiny around claims handling and fairness in liability outcomes continues.
• Regulatory settings support market stability rather than driving pricing pressure.

Strategic Considerations

• 2026 presents a clear opportunity to improve pricing and broaden coverage, especially for strong risk profiles.
• High‑quality claims narratives and governance frameworks increasingly differentiate outcomes.
• Insureds should reassess limits, deductibles, and program structure rather than simply buying “status quo” cover.

Outlook

• The casualty market is expected to remain softening to stable through 2026, provided loss activity and judicial trends remain contained.
• Competition is likely to intensify before the next loss‑driven correction.
• Well‑performing insureds are well placed to lock in favourable terms ahead of the next cycle shift.

Construction

Market Overview

• The softening trend has continued into 2026, though at a more moderate pace.
• Strong competition remains across Contract Works (CAR) and Liability.
• Insurers are becoming more selective, with clear segmentation between high‑ and low‑quality risks.

Insurer Appetite

• Appetite remains solid for construction risks.
• Improved underwriting flexibility with endorsements and conditions.
• Worker‑to‑Worker injury and Water Damage excesses remain high.

Capacity and Reinsurance

• Reinsurance conditions remain stable following consecutive years of rate correction.
• Strong market capacity from both local and global insurers.

Premium Trends

• CAR renewals: –10% to +5%, dependent on claims history and turnover changes.
• Liability: –15% to +5%, dependent on claims history and turnover changes.
• Significant rate reductions largely limited to high‑performing risks.

Challenges and Emerging Risks

• Insurers continue to see high claims frequency and severity for Water Damage and Worker‑to‑Worker injury, managed through higher excesses.
• Inflationary pressures, higher oil prices, trade shortages, and elevated construction costs continue to place upward pressure on insured values, claims severity, and contractor profitability.

Regulatory Oversight

• Various state‑level insurance requirements are being introduced, particularly around developer bonds and latent defects coverage.
• Builders Warranty Insurance changes are being implemented across states, bringing stricter financial requirements and expanded consumer protections.
• The National Construction Code (NCC) is introducing tighter controls on moisture control, fire safety, and commercial energy efficiency, with rollout from May 2026.

Strategic Considerations

• High‑quality and detailed submissions continue to deliver the best outcomes.
• Early engagement with insurers provides improved results on premiums and coverage.

Outlook

• Competitive conditions are expected to persist through 2026.
• Insurers continue to reward strong claims histories and robust risk management.
• Early engagement with insurers and demonstrable risk quality remain key differentiators.

Professional Indemnity

Market Overview

• The PI market is firmly in a soft phase, with premium reductions now sustained following several years of strong profitability.
• Strong prior underwriting results and benign claims experience have reset pricing momentum downward across financial lines (including PI).
• Underlying profitability is now deteriorating toward below‑target or break‑even, despite still‑positive reported results.

Insurer Appetite

• Insurer appetite for PI is very strong, driven by competition and abundant capacity from both local and Lloyd’s markets.
• Appetite has expanded through broader coverage terms and the entry of specialist underwriting agencies targeting niche risks.
• Despite this, some higher‑risk or emerging exposures (e.g. complex liability, new technologies) continue to be underwritten with greater caution.

Capacity and Reinsurance

• PI benefits from high levels of available capacity, with strong participation from global insurers and Lloyd’s syndicates.
• Capacity growth has been supported by favourable reinsurance conditions and strong historical returns, encouraging capital inflows.
• Excess capacity remains a key driver of pricing competition and coverage expansion in the segment.

Premium Trends

• PI premiums are declining (typically –5% to –10%), continuing a multi‑year downward trend.
• Rate reductions are expected to continue over the next 12 months, albeit at a slower pace.
• Pricing pressure reflects excess capacity and strong competition rather than underlying risk improvement.

Market Trends

• Competitive dynamics are driving rate reductions and broader policy wordings, with insurers seeking to preserve or grow market share.
• Growth in underwriting agencies and delegated authority models is intensifying competition in PI placements.
• Market behaviour reflects “rational irrationality”, with insurers sacrificing margin to retain premium volume.

Challenges and Emerging Risks

• Emerging risks, including AI‑related liability exposures, are expected to drive future claims uncertainty in PI.
• Continued economic uncertainty and social inflation are expected to increase claim severity over time.
• The long‑tail nature of the class is likely to expose inadequacy in current pricing levels.

Regulatory Oversight

• New Anti‑Money Laundering / Counter‑Terrorism Financing reforms will increase PI implications for accountants, real estate agents, lawyers, conveyancers and trust or company service providers, driving higher premiums and stricter underwriting as these professions become reporting entities.
• Policies are likely to feature broader but more complex coverage, with heightened scrutiny of claims arising from failures in customer due diligence, Know Your Customer obligations, or suspicious matter reporting, and potential exclusions or limits for regulatory fines or deliberate non‑compliance.
• Insureds are expected to face increased exposure to claims from both regulators and clients for failures to detect or respond to money‑laundering risks, driving higher PI claim frequency and severity over time.

Strategic Considerations

• Capitalise on current soft market conditions to negotiate broader coverage, enhanced terms and competitive pricing rather than renewing existing structures without review.
• Remain mindful that falling premiums may not reflect underlying risk, particularly in relation to emerging exposures such as AI, evolving professional standards and regulatory change.
• Prioritise insurer quality, claims capability and long‑term partnership stability over pure price, given the likelihood of future market correction and tightening.

Outlook

• The PI market is expected to remain soft in the near term, with continued but moderating rate reductions.
• Profitability is likely to trend toward break‑even, increasing the risk of a future market correction.
• Over the medium term, emerging risks and adverse claims trends may trigger a return to rate increases, concluding the current soft cycle.

Management Liability

Market Overview

• The Management Liability (ML) market for SMEs and mid‑market remains moderately firm relative to large corporates, with continued premium increases (generally less than 5%) driven by claims inflation and regulatory exposure.
• SMEs continue to experience rate increases despite broader market softening, reflecting domestic underwriting dynamics and loss experience.

Insurer Appetite

• Insurers show steady to strong appetite for SME and mid‑market ML risks, particularly for well‑managed businesses with strong governance frameworks.
• Competition is increasing, though underwriting remains selective for distressed industries or risks with poor controls.
• Appetite is supported by relatively stable performance compared to more volatile large‑corporate ML portfolios.

Capacity and Reinsurance

• Capacity in the SME and mid‑market ML space is adequate to strong, with multiple insurers competing for market share.
• Growth in underwriting agencies and access to Lloyd’s‑backed capacity continue to support competition.

Premium Trends

• SME and mid‑market ML risks continue to experience ongoing premium increases, typically aligned with claims inflation and exposure growth.
• Rate increases are moderating compared to previous years, with some accounts achieving flat or marginal movements.
• Pricing remains driven by claims costs (including employment practices and regulatory actions) rather than surplus capacity.

Market Trends

• Increased insurer choice and competition is improving access to ML cover and creating greater flexibility in policy structure.
• Broader and more integrated coverage is being offered, with policies expanding to include enhanced employment practices cover, regulatory defence, and aspects of cyber‑related governance risk.

Challenges and Emerging Risks

• Rising employment practices and psychological injury‑related claims are driving higher loss costs across ML portfolios.
• Increased regulatory scrutiny and director liability exposures linked to governance and compliance failures.
• Emerging risks such as cyber governance, AI‑driven decision‑making, and ESG responsibilities are expanding the ML risk profile.

Regulatory Oversight

• New psychosocial safety legislation and heightened regulatory focus on workplace conduct are translating into a material increase in employment‑related exposures.
• Legislative changes and growing community awareness of mental health are driving more frequent Fair Work claims, particularly general protections and workplace rights disputes, which are complex and costly to defend.
• This is contributing to higher volumes and severity of Employment Practices Liability claims, driven by longer claim durations, broader damages (including psychological injury), and more claimant‑favourable outcomes.
• Employment‑related risk is now one of the most significant drivers of loss within ML programs, reinforcing the need for strong HR practices, early intervention, and adequate policy limits.

Strategic Considerations

• Review ML cover to ensure alignment with evolving risks, including psychosocial safety, cyber governance, and regulatory exposure.
• Balance premium pressures against the adequacy of limits and scope of cover, particularly as employment and regulatory claims intensify.
• Demonstrate robust governance, compliance, and risk management, as these remain key differentiators in insurer appetite and pricing.

Outlook

• SME and mid‑market ML is expected to remain more stable than large‑corporate lines, with modest ongoing premium increases.
• Claims pressures, particularly employment and regulatory, are likely to sustain upward pricing tension despite broader market softening.
• Over the medium term, pricing is expected to flatten, provided claims inflation moderates.

Directors & Officers

Market Overview

• The D&O market remains in a prolonged soft phase, with sustained premium reductions following several years of strong profitability and benign claims activity.
• Despite favourable reported results, underlying profitability is deteriorating toward below‑target levels, raising concerns around sustainability.

Insurer Appetite

• Insurer appetite for D&O is very strong across all segments, supported by significant participation from both local insurers and Lloyd’s markets.
• Appetite is particularly high for well‑governed private companies with strong financials and established risk frameworks.
• Insurers are increasingly differentiating through broader coverage and tailored solutions to secure market share.

Capacity and Reinsurance

• The D&O market is characterised by abundant capacity, with oversupply driving competition across all layers.
• Excess capacity is enabling larger limits, multi‑layered programs, and more aggressive pricing strategies.

Premium Trends

• Premium rates continue to decline (typically –5% to –10%), extending a multi‑year softening trend across D&O and broader financial lines.
• Rate reductions are most pronounced for large accounts, while SME and mid‑market clients generally experience more moderate decreases or flat outcomes.
• Pricing pressure reflects excess capacity and competition rather than any material reduction in underlying risk.

Market Trends

• Increased insurer competition is delivering greater choice, improved pricing, and enhanced flexibility in structuring D&O programs.
• Broader policy wordings and enhanced coverage are increasingly available, with many terms reverting toward pre‑hard‑market positions.
• Insurers are engaging more proactively, with underwriters seeking to deploy capacity and secure premium volume.

Challenges and Emerging Risks

• Emerging risks such as AI‑related liability, governance failures, and evolving regulatory expectations are increasing future D&O claims uncertainty.
• Growing concern surrounds Side C (entity securities) exposure, reinforced by recent Australian cases (e.g. A2 Milk and Brambles) determined in favour of plaintiffs, validating the viability of shareholder class actions.
• Economic pressure and insolvency risk, particularly within SME and mid‑market sectors, may further increase director liability exposure and claims frequency.

Regulatory Oversight

• Heightened scrutiny of continuous disclosure and corporate governance obligations is elevating D&O exposure, especially for larger private and mid‑market entities.
• Recent court outcomes in Side C claims are reinforcing a plaintiff‑favourable legal environment, encouraging further securities class action activity.
• Ongoing regulatory focus on workplace conduct, ESG obligations, and disclosure standards is expanding the scope of potential director liability.

Strategic Considerations

• Leverage current soft market conditions to secure adequate Side C limits and ensure program structures appropriately reflect securities exposure.
• Carefully assess the balance between entity and individual cover, given the increasing likelihood of securities‑style claims impacting company balance sheets.
• Prioritise insurers with strong claims capability and class‑action experience, recognising the growing complexity and severity of these matters.

Outlook

• While the D&O market remains soft in the near term, increased success in plaintiff outcomes for Side C claims (e.g. A2 Milk, Brambles) is expected to place upward pressure on pricing and underwriting discipline.
• Rising claims severity and a potential resurgence of shareholder class actions may act as a catalyst for market correction and eventual hardening.
• Over the medium term, insurers are likely to tighten terms, reassess limits, and reprice risk, particularly for larger ASX‑listed entities exposed to securities‑style litigation.

Cyber Liability

Market Overview

• The cyber market continues to soften, with sustained rate reductions driven by excess capacity and strong competition.
• A significant protection gap exists, with many SMEs remaining uninsured despite high exposure to cyber incidents.

Insurer Appetite

• Insurer appetite for cyber is very strong, with many carriers actively seeking growth in SME and mid‑market segments.
• Appetite is supported by expanded coverage offerings and simplified policy wordings to improve accessibility.
• Underwriting discipline remains focused on minimum cybersecurity standards and risk controls, particularly for higher‑risk industries.

Capacity and Reinsurance

• Capacity is ample and growing, with cyber now one of the most competitive classes in the insurance market.
• Capacity continues to exceed demand, especially within the SME segment, contributing to ongoing downward pricing pressure.
• Continued capital inflows and insurer investment reflect cyber as a strategic long‑term growth line.

Premium Trends

• Premium rates have declined for multiple consecutive years, with further reductions expected in the near term.
• SME cyber premiums remain relatively low compared to potential loss exposure, highlighting strong pricing competitiveness.
• Rate reductions are occurring despite increasing frequency of cyber incidents, raising concerns around long‑term pricing adequacy.

Market Trends

• More competitive pricing and broader cover options are making cyber insurance increasingly accessible for businesses.
• Additional services bundled with policies, such as risk assessments, incident response support, and cybersecurity tools, are now widely available.
• Despite improved availability, many businesses remain slow to adopt cyber cover due to cost sensitivity or uncertainty around perceived value.

Challenges and Emerging Risks

• Cyber threats are escalating rapidly, with AI‑enabled attacks increasing both frequency and sophistication.
• A widening cyber protection gap (estimated to exceed 90% for SMEs) leaves many businesses exposed to significant financial loss.
• Emerging risks, including insider threats, social engineering attacks, and system vulnerabilities, continue to increase complexity and loss potential.

Regulatory Oversight

• Increased regulatory focus on data privacy and cybersecurity obligations is raising exposure for businesses of all sizes.
• Ongoing developments and potential reforms to the Privacy Act may expand compliance requirements for SMEs.
• Government initiatives and guidance are aimed at improving SME cyber resilience, though adoption remains inconsistent.

Strategic Considerations

• Now is an opportune time to take advantage of favourable pricing conditions to secure or enhance cyber cover ahead of any market hardening.
• Demonstrating a robust cybersecurity posture and clear evidence of controls can materially improve pricing and coverage outcomes.
• Cyber insurance should form part of a broader risk management framework, encompassing prevention, incident response planning, and staff awareness.

Outlook

• The cyber market is expected to remain soft in the near term, supported by ongoing competition and excess capacity.
• Rising claims frequency and emerging risks may place pressure on insurer profitability and trigger future rate corrections.
• Over the longer term, demand for cyber insurance is expected to increase as regulatory pressure intensifies and awareness of cyber risk continues to grow.

The information on this page is intended for general educational purposes and necessarily simplifies some concepts for clarity. Insurance policies can differ widely between insurers, policy types, and jurisdictions. For guidance on your specific circumstances, you should review your policy documents carefully and consult a qualified insurance adviser, broker, or legal professional.