NEW YORK, NY – After six consecutive years of rate increases, the commercial property insurance market has officially entered a soft market cycle. The Council of Insurance Agents & Brokers (CIAB) reported in October 2025 that commercial property rates fell an average of 8.2% in the second quarter—the first quarterly rate decrease since Q3 2019.
For businesses that have endured years of double-digit premium increases, this is welcome news. But the soft market isn't benefiting all businesses equally. Companies with strong risk profiles are seeing rate reductions of 15-30%, while businesses with poor loss history or high-hazard operations are still facing increases.
Understanding how insurance market cycles work—and how to position your business to capitalize on favorable market conditions—can save your business tens or hundreds of thousands of dollars annually. Here's what you need to know about the 2025 soft market and how to take advantage of it.
What Is a Soft Market (and Why Should You Care)?
Insurance markets operate in cycles, alternating between "hard markets" (rising rates, restricted coverage, limited capacity) and "soft markets" (falling rates, broader coverage, abundant capacity).
The Insurance Market Cycle Explained
Hard Market Characteristics:
- Premium rates increasing 10-40% annually
- Insurers restricting coverage terms and adding exclusions
- Underwriters declining risks they previously accepted
- Higher deductibles and lower limits
- Limited market capacity (fewer insurers competing for business)
- Difficult to place coverage; businesses may receive only one quote
Soft Market Characteristics:
- Premium rates declining 5-20% annually
- Insurers broadening coverage and removing restrictions
- Underwriters accepting risks they previously declined
- Lower deductibles and higher limits available
- Abundant capacity (many insurers competing for business)
- Easy to place coverage; businesses receive multiple competitive quotes
What drives these cycles?
Insurance markets are fundamentally driven by capacity—the amount of capital available to underwrite risk. When insurers are profitable and have strong surplus, they compete aggressively for premium by lowering rates and broadening coverage (soft market). When losses deplete their surplus, they raise rates and restrict coverage to rebuild capital (hard market).
The 2019-2024 hard market was driven by:
- Record catastrophe losses ($500+ billion in six years)
- Social inflation driving liability claims 15-25% higher
- Low investment returns (insurers earn significant income from investing premium)
- Reinsurance rate increases (40-60% in some lines)
- COVID-19 business interruption losses ($30+ billion)
The 2025 soft market transition is occurring because:
- Insurers rebuilt surplus after six years of rate increases
- Investment returns improved (5-6% yields on conservative bond portfolios)
- Loss ratios stabilized in most lines except catastrophe property
- New capacity entered the market (new insurers, increased reinsurance)
- Competition intensified as insurers seek to grow premium volume
Why It Matters to Your Business
During the 2019-2024 hard market, businesses saw cumulative premium increases of 40-110% depending on their industry and risk profile. A business paying $50,000 annually for property insurance in 2019 was likely paying $75,000-$100,000 by 2024.
In the current soft market, those same businesses can potentially reduce premiums back to 2021-2022 levels—or even lower if they've improved their risk profile.
Example: A manufacturing company paid $180,000 for commercial package insurance in 2024 (up from $95,000 in 2019). At their October 2025 renewal, they received quotes ranging from $142,000 to $158,000—a 12-21% reduction. By improving their risk profile and working with a knowledgeable broker who marketed to 8 carriers, they secured coverage for $138,000—a 23% savings worth $42,000 annually.
The Q2 2025 Data: Not All Lines Are Softening Equally
The CIAB survey reveals significant variation across different insurance lines:
Commercial Property: Down 8.2% (Moderate Softening)
Non-catastrophe exposed property: Rates down 12-18%
- Midwest manufacturing facilities: -14% average
- Office buildings in low-hazard areas: -16% average
- Warehouses with good protection: -13% average
Catastrophe-exposed property: Rates still increasing 15-35%
- Coastal hurricane zones: +22% average (though this is down from +40% in 2024)
- Wildfire interface areas: +28% average
- Severe convective storm zones: +18% average
Why the split? Catastrophe losses continue to drive property insurance losses (see our recent analysis of 2025's $80 billion in catastrophe losses). Insurers are charging significantly more for catastrophe exposure while competing aggressively for well-protected, low-hazard property risks.
General Liability: Down 6.4% (Mild Softening)
Manufacturing GL: Rates down 8-12% Contracting GL: Rates down 5-9% Retail/Hospitality GL: Rates down 3-7% Professional services GL: Rates down 7-11%
Exception—High social inflation sectors: Rates still increasing for businesses with high "nuclear verdict" exposure:
- Transportation and trucking: +8-15% (ongoing concerns about large jury awards)
- Healthcare: +5-12% (medical malpractice severity trends)
- Premises liability high-risk: +6-10% (apartments, entertainment venues)
Workers Compensation: Down 11.3% (Strong Softening)
Workers compensation is experiencing the strongest rate reductions of any major commercial line. This reflects:
- Favorable loss development (claims coming in lower than expected)
- $16 billion reserve surplus (insurers over-reserved for claims that didn't materialize)
- Increased competition from new market entrants
- Stable regulatory environment in most states
Rate changes by business type:
- Office/clerical: -13% to -18%
- Light manufacturing: -10% to -15%
- Retail: -12% to -16%
- Construction trades: -8% to -12%
- Transportation/delivery: -7% to -11%
Commercial Auto: Flat to +3.2% (Market Turning)
After years of 15-25% annual increases, commercial auto rates have stabilized:
- Clean fleet operators with strong safety programs: -2% to +1%
- Average fleet operators: +2% to +5%
- Poor loss history or high-risk operations: +8% to +15%
The commercial auto market hasn't truly softened yet but is no longer hardening. This represents a significant improvement from 2023-2024.
Cyber Insurance: Down 4.8% (Early-Stage Softening)
Cyber insurance rates are decreasing for businesses with strong security controls:
- Businesses with MFA, EDR, and email security: -8% to -15%
- Average security posture: -2% to -6%
- Poor security controls: +5% to +12%
Cyber insurance is highly risk-sensitive. The soft market benefits only those businesses that have invested in cybersecurity.
Professional Liability (E&O): Up 2.1% (Still Hardening Slightly)
Professional liability remains challenging in certain sectors:
- Technology E&O: +5% to +10% (ongoing concerns about software vulnerabilities, AI liability)
- Design professional E&O: +3% to +8% (construction defect trends)
- Legal malpractice: +4% to +9% (severity trends)
- Financial services E&O: -1% to +4% (varies widely by specialty)
Five Strategies to Maximize Soft Market Opportunities
Soft markets create opportunities, but only for businesses that act strategically. Here's how to capitalize on current conditions:
Strategy 1: Market Your Insurance Aggressively
During hard markets, businesses often couldn't get competitive quotes—insurers weren't interested in new business, and brokers struggled to find any coverage at all.
Soft markets change this dynamic completely. Insurers are hungry for growth and will compete aggressively for good accounts.
How to market effectively:
Start early: Begin the marketing process 90-120 days before renewal (vs. the 30-45 days that's typical). This gives insurers more time to quote and creates urgency as your renewal date approaches.
Cast a wide net: Request quotes from 6-10 insurers (vs. 2-3 in hard markets). More competition = better pricing.
Provide comprehensive information upfront: The faster insurers can underwrite your account, the more competitive they can be. Provide:
- 5 years of loss history (not just the 3-5 years insurers request)
- Detailed risk management documentation
- Photos and videos of your operations
- Safety program materials
- Financial statements
- Updated property valuations
Highlight improvements: If you've invested in risk reduction since your last renewal, document it prominently:
- New fire suppression systems
- Cybersecurity upgrades
- Safety program enhancements
- Building improvements
- Equipment upgrades
Use specialized brokers: Brokers who specialize in your industry have relationships with insurers who want your business. General commercial brokers may not know which insurers are targeting your sector.
Real-world example: A printing company renewed their insurance in March 2025 with their incumbent carrier at a 6% reduction. In September, they decided to test the market and had their broker solicit quotes from 8 additional carriers. They received 6 quotes, ranging from 14% to 24% below their current premium. They moved to a new carrier and saved $38,000 annually—while improving their coverage terms.
Strategy 2: Negotiate Coverage Enhancements, Not Just Price
Soft markets offer opportunities to improve coverage terms that were restricted during the hard market:
Common hard market restrictions to negotiate away:
Property insurance:
- Remove or increase sublimits on ordinance and law coverage (building code upgrade costs)
- Eliminate wind-driven rain exclusions
- Remove coinsurance penalties
- Increase blanket limits
- Add equipment breakdown coverage
- Extend business income coverage period from 12 to 18-24 months
General liability:
- Remove absolute pollution exclusions (get at least limited pollution coverage)
- Increase per-occurrence limits
- Add contractual liability coverage
- Broaden products/completed operations coverage
- Remove employee/contractor exclusions
Cyber insurance:
- Remove or increase sublimits on social engineering fraud
- Extend breach response period from 12 to 24 months
- Add contingent business interruption coverage
- Include ransomware/extortion coverage with no sublimit
- Add regulatory defense coverage for all jurisdictions
Workers compensation:
- Add USL&H coverage (maritime)
- Include stop-gap coverage if you operate in monopolistic states
- Add employers' liability excess coverage
Why this matters: During hard markets, businesses often had to accept restricted coverage to get any policy at all. Soft markets let you restore the coverage you actually need.
Negotiation tip: Don't just accept the initial quote. When an insurer quotes $X with certain restrictions, ask: "What would the premium be if you removed [specific restriction]?" Often the price difference is minimal—maybe 2-3%—but you didn't know because you didn't ask.
Strategy 3: Lock In Multi-Year Rate Guarantees
Some insurers will offer multi-year policies with guaranteed rates (or guaranteed maximum increases) to secure your business in a soft market.
Common multi-year structures:
Three-year guaranteed rate: Premium stays flat for three years
- Benefit: Budget certainty; protection if market hardens
- Cost: Premium typically 3-7% higher than one-year policy
- Best for: Businesses that want long-term stability and believe the soft market won't last
Three-year rate cap: Premium can decrease but won't increase more than X% annually
- Example: "Your rate can go down in years 2-3 but will never increase more than 3% per year"
- Benefit: Participate in further softening while capping upside risk
- Cost: Premium typically 2-4% higher than one-year policy
- Best for: Businesses that want to participate in further rate decreases while limiting hard market risk
Sliding-scale multi-year: Premium adjusts based on loss experience but within guaranteed bands
- Example: "If your loss ratio is under 40%, your year-2 rate decreases 5%. If over 60%, increases 5%. Otherwise stays flat."
- Benefit: Rewards good loss experience; aligns insurer and insured incentives
- Cost: Typically same as one-year policy
- Best for: Businesses with strong risk management and confidence in their loss performance
When multi-year policies make sense:
- You believe the soft market is temporary and will harden within 2-3 years
- Your business values budget certainty
- You're in a line of business that experiences dramatic rate swings (cyber, property in cat zones)
- You have stable operations and don't expect significant changes that would require policy modifications
When to avoid multi-year policies:
- You expect to make significant operational changes
- You believe the soft market will deepen and rates will continue falling
- You prefer flexibility to re-market annually
- Your loss experience is likely to improve significantly (you want to benefit from that improvement at next year's renewal)
Strategy 4: Review and Increase Coverage Limits
Hard markets forced many businesses to reduce limits to manage premium costs. Soft markets are the time to restore adequate limits:
Common scenarios where businesses are underinsured:
Property values increased but limits didn't: Building and contents values have increased 25-40% since 2020 due to inflation. If your property limits haven't increased proportionally, you're underinsured and may face coinsurance penalties at claim time.
What to do: Get updated property valuations (replacement cost estimates) and increase limits to match. In a soft market, the rate per $1,000 of coverage is decreasing, so you can often increase limits 30-40% while still reducing total premium.
Business income limits based on pre-COVID revenue: If your business has grown significantly since your last business income worksheet, your BI limits may be inadequate.
What to do: Complete an updated business income worksheet based on current revenue, margins, and expense structure. Increase limits accordingly. Better yet, switch to an "agreed amount" or "actual loss sustained" BI form that doesn't cap your recovery at an arbitrary limit.
Liability limits that don't reflect current verdict trends: Jury verdicts have increased dramatically. A $1 million general liability limit that seemed adequate in 2018 may be insufficient in 2025 when median commercial auto verdicts exceed $5 million.
What to do: Increase underlying liability limits to $2-3 million per occurrence and add a $5-10 million umbrella policy. In soft markets, umbrella pricing is often 20-40% lower than hard markets—making this the ideal time to add higher limits.
Example: A regional HVAC contractor carried $1M general liability / $1M auto liability with no umbrella. Their broker noted that commercial auto verdicts in their state averaged $3.2M, creating significant exposure.
In the soft market, they increased their underlying auto limit to $2M (+$4,800 premium) and added a $5M umbrella (+$6,200 premium). Total cost increase: $11,000. But this protected them against financial ruin from a single severe accident that previously would have exceeded their limits by millions.
Strategy 5: Use Soft Markets to Fix Past Coverage Mistakes
Hard markets forced businesses to make uncomfortable compromises. Soft markets offer opportunities to fix them:
Common hard market compromises to reverse:
Accepted a high deductible to reduce premium: During hard markets, some businesses increased deductibles from $5,000 to $25,000 or higher to manage premium costs.
Soft market solution: Reduce deductibles back to comfortable levels. The rate decrease may fully offset the deductible reduction, giving you better coverage at the same or lower premium.
Removed coverages to save money: Businesses often dropped equipment breakdown, spoilage coverage, accounts receivable, or other "optional" coverages during hard markets.
Soft market solution: Add these coverages back. Insurers are pricing them more competitively, and the small premium increase is worth the protection.
Accepted restricted coverage forms: Some businesses moved from "special form" (all-risk) property policies to "broad form" (named perils) policies to save premium during hard markets.
Soft market solution: Move back to special form coverage. The price difference narrows significantly in soft markets, and all-risk coverage is dramatically better when claims occur.
Moved to surplus lines carriers: During hard markets, some businesses could only find coverage from surplus lines carriers (non-admitted insurers) at significantly higher prices and with fewer regulatory protections.
Soft market solution: Move back to admitted carriers. Standard market carriers are now competing for business they declined during hard markets, often at 30-50% below surplus lines pricing.
Industry-Specific Soft Market Opportunities
Different industries are experiencing different market conditions. Here's how the soft market affects specific sectors:
Manufacturing: Strong Softening (12-18% Rate Decreases)
Why manufacturing is seeing aggressive rate reductions:
- Loss ratios have been favorable (claims lower than expected)
- Abundant capacity (many insurers want manufacturing accounts)
- Competition from specialty manufacturers' programs
- Property values stabilizing after years of inflation
Best opportunities:
- Equipment breakdown and mechanical breakdown coverage: Rates down 15-25%
- Property coverage for well-protected facilities: Rates down 14-20%
- Products liability for low-hazard products: Rates down 10-15%
- Workers compensation: Rates down 11-16%
What manufacturers should do:
- Market property insurance to 8-10 carriers
- Request quotes from manufacturers-focused programs (selective manufacturers programs from FM Global, Hartford, Zurich, etc.)
- Highlight fire protection systems and risk management investments
- Increase business income limits (they're cheaper now)
Technology Companies: Selective Softening (Varies by Risk Profile)
Cyber insurance for tech companies:
- Strong security controls: Rates down 10-18%
- Average security: Rates down 4-8%
- Poor security: Rates still up 5-12%
E&O insurance:
- SaaS with established products: Rates flat to -5%
- AI/ML companies: Rates up 8-15% (emerging risk concerns)
- Established software: Rates down 3-7%
What tech companies should do:
- Document cybersecurity investments comprehensively (this is the primary rating factor)
- Consider specialized tech E&O programs (often more competitive than standard market)
- Bundle cyber + E&O + crime for multi-line discounts (10-15% savings)
Real Estate / Hospitality: Mixed Market
Apartments / Multifamily:
- Non-catastrophe zones: Rates down 8-14%
- Catastrophe zones: Rates still up 18-30%
- Class A properties with strong safety programs: Best rate decreases
Hotels:
- Limited service hotels: Rates down 5-9%
- Full service hotels: Rates down 3-7%
- Resorts in cat zones: Rates still up 15-25%
What real estate operators should do:
- Emphasize safety programs (this is the key differentiator)
- Consider deductible reductions (buydowns are cheaper in soft markets)
- Market to specialty hospitality programs
Construction / Contracting: Early-Stage Softening
Construction insurance is just beginning to soften after years of hard market:
- General liability: Rates down 4-8%
- Workers compensation: Rates down 8-13%
- Contractors equipment: Rates down 6-11%
- Builders risk: Rates flat to +3%
What contractors should do:
- Don't assume incumbents will offer the best renewal terms (market it)
- Highlight safety programs and mod factors below 1.0
- Consider wrap-up insurance programs for large projects (pricing has improved)
Healthcare: Still Challenging
Medical malpractice and healthcare liability remain difficult:
- Physicians: Rates flat to +6%
- Hospitals: Rates up 4-10%
- Long-term care: Rates up 8-15%
- Allied health: Rates flat to +4%
Healthcare is lagging the soft market due to ongoing severity trends and social inflation.
What healthcare providers should do:
- Focus on risk management documentation (the only lever that consistently reduces rates)
- Consider captives or risk retention groups for multi-location operators
- Lock in multi-year rate caps if offered
Transportation: Just Stabilizing (Not Yet Soft)
Commercial auto for trucking is stabilizing after brutal hard market:
- Clean fleets with telematics: Rates flat to -3%
- Average fleets: Rates +2% to +6%
- Poor loss history: Rates +10% to +20%
What trucking companies should do:
- Implement telematics and driver monitoring (rate impact: -10% to -20%)
- Document driver training and safety programs
- Consider higher deductibles to reduce premiums (soft market hasn't arrived yet for trucking)
How Long Will the Soft Market Last?
Insurance market cycles typically last 3-5 years. The 2025 soft market is in its early stages, likely to continue into 2027-2028 based on historical patterns—unless a major catastrophe or economic disruption changes the dynamics.
Factors that could end the soft market early:
- Major catastrophe losses: Another $100+ billion cat year (like 2025) would deplete insurer surplus and trigger a hard market
- Economic recession: Market downturn would reduce insurers' investment income and trigger underwriting discipline
- Regulatory changes: New coverage mandates or restrictions could alter economics
- Social inflation acceleration: If jury verdicts increase faster than expected, liability lines would harden
- Reinsurance shock: If reinsurance costs spike (due to cat losses or other factors), primary insurers would raise rates
Factors supporting a prolonged soft market:
- Strong insurer surplus: Insurers have record capital levels after six years of rate increases
- New market entrants: New insurers and expanded capacity supports competition
- Investment income: 5-6% bond yields allow insurers to accept lower underwriting margins
- Technology improvements: AI and data analytics enabling more accurate pricing and lower expenses
- Alternative capital: Catastrophe bonds and insurance-linked securities providing additional capacity
Most likely scenario: Soft market continues through 2027, then gradually transitions to a neutral market (flat rates) in 2028-2029, with the next hard market not arriving until 2030+ unless a major disruptor occurs.
Don't Wait to Act
Soft markets create opportunities, but they require action. Businesses that simply accept renewal offers from incumbent carriers typically see small rate decreases (3-5%). Businesses that actively market their insurance, negotiate coverage enhancements, and work with knowledgeable brokers see dramatically better results (15-30% savings plus improved coverage).
Four steps to take in the next 30 days:
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Review your current coverage for gaps created during the hard market: What limits did you reduce? What coverages did you drop? What restrictions did you accept?
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Get updated property valuations: Ensure your limits reflect current replacement costs to avoid coinsurance penalties
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Document risk improvements: Create a comprehensive summary of safety programs, security upgrades, and risk management investments
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Talk to your broker about marketing strategy: How many carriers will they approach? What enhancements will they negotiate? Are they targeting the right insurers for your industry?
The soft market won't last forever. Businesses that act now can lock in favorable rates and coverage terms that will protect them when the inevitable next hard market arrives.
Ready to capitalize on soft market conditions? Understanding market dynamics and positioning your business competitively requires expertise in both insurance and risk management. Work with professionals who actively monitor market conditions and can help you secure coverage that reflects your actual risk profile—not outdated assumptions from the hard market.
Sources: Council of Insurance Agents & Brokers Q2 2025 Market Survey, AM Best, Insurance Information Institute, S&P Global Market Intelligence