NEW YORK, NY – Commercial property insurance rates declined 8% globally in the third quarter of 2025, with the Pacific region leading at -14%, marking the most dramatic rate reversal in property insurance since 2016 and signaling that the brutal seven-year hard market has definitively ended. According to Marsh's Global Insurance Market Index, all global regions experienced property rate decreases ranging from 3% (Middle East/Africa) to 14% (Pacific), creating unprecedented opportunities for businesses to secure comprehensive coverage at rates not seen since the pre-pandemic era.
The Q3 decline represents acceleration from Q2's -5.5% decrease and Q1's -4% drop, suggesting the soft market momentum is building rather than plateauing. After enduring cumulative rate increases of 60-100% between 2018-2023, commercial property buyers are finally experiencing relief—and insurers are competing aggressively to capture market share after years of defensive underwriting and capacity management.
For businesses, this creates a strategic window to not only reduce costs but fundamentally restructure property insurance programs: eliminate coverage restrictions accepted during the hard market, reduce deductibles to lower out-of-pocket exposure, increase limits to match inflated replacement costs, and negotiate multi-year rate guarantees before inevitable market hardening resumes.
Global Regional Breakdown: Where Rates Are Falling Fastest
Pacific Region: Leading Global Decline (-14%)
Australia and New Zealand driving the steepest property rate decreases globally:
Why the dramatic decline:
- Catastrophe losses normalized: After devastating bushfires (2019-2020) and floods (2021-2022) drove rates up 80-120%, recent years saw below-average catastrophe activity
- Reinsurance costs plummeted: Australian and New Zealand reinsurance costs declined 20-30% as global reinsurers increased capacity and catastrophe losses moderated
- Intense competition: Local and international carriers flooding market seeking growth after profitable 2023-2024 underwriting years
- Regulatory pressure: Australian regulators encouraging competition and rate moderation after consumer complaints about affordability
Who benefits most:
- Manufacturing and warehouse properties in low-catastrophe zones (inland areas, non-bushfire regions): Seeing 18-25% rate decreases
- Multi-location portfolios consolidating with single carrier: Achieving 20-30% savings through volume discounts
- Businesses with strong risk management (sprinklers, security, maintenance): Additional 10-15% discounts on top of market softening
Strategic opportunities:
- Australian and New Zealand businesses should obtain 7-10 competitive quotes to maximize rate competition
- Now is the time to increase limits (replacement costs have risen 30-40% since 2020, many businesses underinsured)
- Reduce percentage-based wind/hail deductibles to flat-dollar deductibles
- Lock in 3-year rate guarantees before market hardens
United States and Latin America (-9% Each)
U.S. property market showing consistent softening:
Regional variation within U.S.:
- Midwest and Mountain West (low catastrophe): -12% to -18%
- Mid-Atlantic and Northeast inland: -10% to -15%
- Southeast inland (hurricane-exposed): -5% to -8%
- Gulf Coast and Florida: -2% to +5% (still challenging despite overall softening)
- California wildfire zones: +5% to +10% (hardening while overall market softens)
Latin America dynamics:
- Brazil and Mexico leading decline with -12% as insurer capacity enters previously underserved markets
- Caribbean mixed: Islands without recent hurricane activity seeing -8% to -12%, hurricane-exposed islands flat to +5%
- Argentina, Chile, Colombia seeing -6% to -10% as economic stability improves and insurance adoption increases
United Kingdom (-7%)
Post-Brexit market stabilization driving competitive dynamics:
Loss factors improving:
- Weather-related property losses declining vs. 2020-2023 elevated activity
- Flood defenses and property resilience investments reducing insured losses
- Theft and vandalism declining as economy stabilizes
Market dynamics:
- Lloyd's syndicates and company markets competing aggressively for quality accounts
- European carriers entering UK market seeking growth post-Brexit clarity
- Insurtech and MGA competition pressuring traditional carriers
Strategic opportunities:
- UK businesses should leverage Brexit-era competition between Lloyd's, companies, and European carriers
- Consider multi-year deals locking in favorable rates
- Increase terrorism limits (often excluded or sublimited during hard market) while rates are soft
Europe, Asia, and Middle East/Africa (-3% to -7%)
Varied regional dynamics:
Europe (-4%): Continental markets (Germany, France, Netherlands, Scandinavia) softening as catastrophe losses moderate and capacity increases. Eastern Europe seeing -6% to -8% as insurance penetration grows.
Asia (-5%): Developed markets (Singapore, Hong Kong, Japan) leading decline at -7% to -9%, while emerging markets (India, Southeast Asia, China) showing -2% to -4% as infrastructure risk remains elevated.
Middle East/Africa (-3%): Most stable region with modest softening due to ongoing geopolitical risks, infrastructure challenges, and limited insurance penetration constraining market development.
What's Driving the Global Property Rate Decline
Factor 1: Reinsurance Market Stabilization
After peaking in 2023, reinsurance rates declined 5-10% in 2024 and early 2025:
Why reinsurance softened:
- Catastrophe losses normalized in 2024-early 2025: Major catastrophes occurred but didn't exceed $50-60B globally (threshold that triggers market hardening)
- New capital entered reinsurance: Alternative capital (ILS, catastrophe bonds, collateralized reinsurance) increased from $90B to $110B+ 2023-2025
- Profitable underwriting: Reinsurers generated strong returns 2023-2024, rebuilding surplus and enabling capacity expansion
Impact on primary insurers: Reinsurance costs account for 15-30% of primary insurer costs for catastrophe-exposed properties. 5-10% reinsurance rate reduction translates to 1-3% primary rate reduction opportunity, which insurers pass to policyholders to gain market share.
Factor 2: Improved Insurer Profitability
Commercial property combined ratios improved from 105-110 (2020-2022) to 96-100 (2024-2025):
Why profitability improved:
- Rate increases worked: Seven years of rate increases (totaling 60-100%) finally offset claim cost inflation and restored profitability
- Catastrophe losses moderated: 2024 saw $80-90B in global insured catastrophe losses—elevated but not extreme (2017, 2021, 2022 exceeded $120B)
- Underwriting discipline: Insurers improved risk selection, eliminated unprofitable accounts, and tightened terms during hard market
Result: With profitability restored, insurers can compete on price rather than purely defending margins. They're trading margin for growth—accepting 96-98 combined ratios (instead of 95) to gain market share.
Factor 3: Competition for Market Share
After years of shrinking policy counts, insurers desperate for growth:
Market dynamics:
- Insurer surplus capital at record highs: P&C insurers hold $1+ trillion in surplus capital requiring deployment to generate returns
- Policy counts declined 2018-2023: Rate increases drove businesses to increase deductibles, reduce limits, or self-insure—insurers lost customers
- Growth mandates: After restoring profitability, management teams face pressure to grow revenue and deploy capital
Competitive strategies:
- Rate discounting: Offering 10-20% below market rates for quality accounts with strong risk profiles
- Broader coverage terms: Removing sublimits, exclusions, and restrictions implemented during hard market
- Multi-year rate guarantees: Offering 2-3 year guaranteed rates to win accounts from competitors
- Enhanced services: Providing risk engineering, loss control consulting, and technology platforms to differentiate beyond price
Example: A manufacturing property previously paying $150K annually with $25K wind/hail deductible and $500K flood sublimit received five Q3 2025 renewal quotes:
- Incumbent: $142K (-5%), same terms
- Carrier B: $128K (-15%), $10K wind/hail deductible, $1M flood coverage, no sublimit
- Carrier C: $135K (-10%), $15K wind/hail deductible, full flood coverage, 3-year rate guarantee
- Carrier D: $125K (-17%), $10K wind/hail deductible, full flood coverage, free risk engineering services
- Carrier E: $138K (-8%), same terms as incumbent but included $5K technology credit for IoT sensors
Selected Carrier D: 17% savings plus coverage enhancements worth estimated $15K additional value.
Action Plan: Capitalizing on Q3 2025 Property Market Softening
Action 1: Shop Coverage Immediately (If Renewal in Q4 2025 or Q1 2026)
Start 90-120 days before renewal:
Obtain 6-8 competitive quotes:
- 3-4 traditional admitted carriers (Travelers, Hartford, Chubb, Liberty Mutual, Zurich)
- 2-3 specialty/surplus lines carriers for unique risks or challenging locations
- 1-2 insurtech or MGA options for comparison (Next Insurance, Pie Insurance for smaller accounts)
Prepare comprehensive submission:
- Current policy declarations
- 5-year loss history (detailed loss runs)
- Property appraisals and statements of values
- Recent property photos (exterior, roof, HVAC, electrical, fire protection systems)
- Risk management documentation (sprinklers, security, maintenance programs, loss control initiatives)
Leverage competition: Use lowest quotes to negotiate with incumbent and other top carriers. Soft markets create 20-30% rate variation between carriers—you must shop to capture savings.
Action 2: Eliminate Hard Market Restrictions
During 2018-2023 hard market, many businesses accepted:
Coverage restrictions:
- Sublimits: Flood, wind/hail, business income, ordinance or law, equipment breakdown limited to $100K-$500K vs. full limits
- Excluded perils: Flood, earthquake, earth movement excluded entirely
- Higher deductibles: Wind/hail deductibles increased from flat $5K-$10K to percentage-based 2-5%
- Coinsurance penalties: 90% coinsurance clauses requiring insurance to 90% of value or face claim penalties
- Aggregate limits: Total claims in policy year capped at $5M-$10M even if building limits are $20M+
- Reduced BI period: Business income coverage reduced from 12-24 months to 6-12 months
Now demand restoration:
- Sublimits to full limits: Negotiate full limits for flood, wind/hail, BI, ordinance/law
- Excluded perils covered: Add back flood, earthquake coverage (or purchase separate if excluded)
- Reduce deductibles: Return to flat-dollar deductibles from percentage-based
- Remove coinsurance: Negotiate agreed value or no coinsurance clauses
- Remove aggregate limits: Full limits apply per occurrence, not aggregate
- Restore BI period: 12-24 months business income coverage
Example: A hospitality property accepted these restrictions in 2022 to maintain coverage:
- $5M building limit with 3% wind/hail deductible ($150K deductible)
- $500K flood sublimit (property is in flood zone, needs $5M)
- 12-month BI period (down from 24 months)
- 90% coinsurance clause
Q3 2025 renewal: Restored full terms:
- $5M building limit with $25K flat wind/hail deductible (vs. $150K)
- $5M flood coverage, no sublimit
- 24-month BI period
- Agreed value, no coinsurance
- Premium: $185K (down from $220K in 2024 despite better coverage)
Action 3: Optimize Replacement Cost Values
Many properties overinsured based on inflated 2021-2022 replacement cost estimates (during peak construction cost inflation):
Challenge valuations:
- Obtain current replacement cost appraisals ($2K-$5K typically)
- Construction costs stabilized 2023-2025 after surging 30-40% in 2020-2022
- Many properties valued 10-20% too high based on outdated estimates
Example: A warehouse insured for $8M based on 2022 appraisal obtained new appraisal showing $6.8M current replacement cost. Reducing insured value from $8M to $6.8M saved $12K annually (15% premium reduction).
But don't underinsure: Coinsurance clauses penalize underinsurance. If you reduce values, ensure appraisal is accurate and conservative to avoid claim penalties.
Action 4: Increase Limits Where Needed
Paradoxically, while some properties are overinsured, many are underinsured:
Replacement costs increased 30-40% since 2019 due to labor shortages, material costs, supply chain disruptions. Properties last appraised pre-pandemic may be underinsured 20-35%.
With rates declining, now is the time to increase limits to proper values:
Example: An office building last appraised in 2018 at $5M replacement cost obtained 2025 appraisal showing $6.8M current cost (+36%).
Increasing limits in hard market (2023): $6.8M limits would have cost $95K premium (+36% vs. $5M limits)
Increasing limits in soft market (2025): $6.8M limits cost $78K premium (+10% vs. $5M limits, but overall premium down 15% from $92K in 2023)
Result: Properly insured at $6.8M for $14K less than underinsured at $5M two years earlier.
Action 5: Consider Multi-Year Rate Guarantees
Some insurers offer 2-3 year guaranteed-cost policies in soft markets:
Advantages:
- Rate protection if markets harden in 2026-2027 due to major catastrophes
- Budget certainty for multi-year planning
- Reduced administrative burden (one renewal every 2-3 years vs. annually)
Disadvantages:
- Premiums typically 3-7% higher than annual policies to compensate insurer for rate guarantee
- If markets continue softening in 2026-2027, you miss further rate decreases
- Harder to switch carriers mid-term if better options emerge
When it makes sense:
- If you believe rates have bottomed and will increase 2026-2027 (due to expected major catastrophe or economic disruption)
- If you value budget certainty over potential further savings
- If administrative simplification is priority
When annual policies are better:
- If you expect further softening in 2026 (rates declining for 6th-7th consecutive quarters)
- If you want flexibility to shop carriers annually
- If you're willing to accept renewal uncertainty for potential savings
Current assessment: With Q3 2025 showing accelerating softening (-8% vs. -5.5% in Q2), markets could soften further through 2026 barring major catastrophes. Annual policies likely provide more opportunity to capture additional decreases. But high-catastrophe properties (Gulf Coast, California wildfire zones, earthquake zones) should consider multi-year guarantees as one major event could trigger 30-50% rate increases within months.
What Could Reverse the Property Soft Market
Major Catastrophe Year
If 2025-2026 sees $120B+ in global insured catastrophe losses:
- Reinsurance rates would spike 20-50% at 1/1/2026 or 1/1/2027 renewals
- Primary insurers would immediately increase rates 20-40% to offset reinsurance costs
- Capacity would contract, particularly for catastrophe-exposed properties
- Soft market would end abruptly within 6-12 months
Likelihood: Moderate to high—climate change increasing frequency and severity of catastrophes. 2024 saw $80-90B (elevated but not extreme). One major hurricane ($60B+) or series of severe events could trigger hardening.
Economic Recession
Deep recession reducing insurer investment returns would force higher underwriting margins (rate increases) to maintain profitability.
Reinsurance Market Shock
Reinsurer insolvencies or capacity withdrawal would tighten reinsurance and drive primary rate increases.
Key Takeaways
Commercial property rates declined 8% globally in Q3 2025, with Pacific region leading at -14% and U.S./Latin America at -9%, marking the most dramatic property rate reversal since 2016.
All global regions experiencing property rate decreases ranging from -3% to -14%, creating unprecedented opportunities across all markets.
Reinsurance stabilization, improved insurer profitability, and competition for market share are driving sustained property rate declines for 6th consecutive quarter.
Businesses should shop 6-8 carriers to capture 15-25% rate savings typical in current market conditions.
Eliminate hard market restrictions (sublimits, higher deductibles, excluded perils, coinsurance penalties) now that insurers competing on coverage breadth.
Optimize property valuations but ensure adequate limits—some properties overinsured based on 2021-2022 inflated estimates, others underinsured due to outdated pre-pandemic appraisals.
Consider multi-year rate guarantees strategically—protect against potential 2026-2027 hardening if major catastrophes occur, but risk missing further softening if favorable conditions persist.
Soft market may be short-lived—major catastrophe year ($120B+ losses) would trigger 20-40% rate increases within 6-12 months, ending soft market abruptly.
The Q3 2025 property market represents the best opportunity in nearly a decade to secure comprehensive coverage at favorable rates. Businesses that act decisively—shopping coverage extensively, negotiating aggressively, eliminating hard market restrictions, optimizing values and limits, and considering strategic multi-year agreements—will achieve 20-35% cost savings while substantially improving coverage. Those that passively renew or delay action will miss a window that could close rapidly if catastrophe losses spike in late 2025 or 2026.
Ready to capitalize on the property insurance soft market? With rates declining 8% globally and insurers competing aggressively, businesses can achieve significant savings while eliminating hard market coverage restrictions. Working with experienced brokers ensures you access the most competitive markets and optimize coverage for your specific risk profile.
Sources: Marsh Global Insurance Market Index Q3 2025, Property Insurance Market Analysis, Regional Market Reports