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Property and casualty insurance has traditionally been a cyclical industry, meaning it goes through phases of firm pricing and tight capacity followed by softer market conditions that tend to favor insurance buyers. The ups and downs of insurance cycles complicate brokers’ and insurers’ plans for profitable growth. Commission income increases relatively easily in the tailwind of a hard market cycle, but it’s difficult to notch commission growth in the stiff headwind of falling premiums. Can brokers achieve steady growth amid market cycles?

Consistent growth for brokers is challenging, but it is possible. A proven strategy for increasing top-line results is mergers and acquisitions. Beyond the basic numbers, integrating another successful brokerage firm can expand the combined entity’s market presence and service capabilities. That is why so many insurance brokers are committed to M&A. There is, however, another method to achieving steady growth: placement optimization.

To understand how placement strategy can work separately, and in tandem with, M&A strategies let’s look at how insurance market cycles themselves have evolved.

Historical trends

An analysis of the property/casualty market by ALIRT Å˽ðÁ«´«Ã½Ó³»­ Research shows the average hard market cyber since the 1980s lasted three or four years, followed by a roughly equal or longer soft cycle. From the 1970s until 2002, ALIRT found each hard market was punctuated by spikes in premiums, and then precipitous drops in pricing. This pattern changed in 2018, however, when a combination of factors pushed P/C lines into a hard market that lasted into 2024 – six years.

A notable departure from earlier decades is a longer, smoother set of pricing increases. If this pattern holds, insurance brokers and buyers will see incremental change in rates, rather than sharp peaks and valleys.

The shift away from the price spikes is a good thing for all concerned. During severe hard markets, when capacity is constrained and rates are high, brokers lean heavily on their creativity and relationships with underwriters to meet clients’ coverage needs. Risk managers find large increases and declines in insurance pricing difficult to budget for and even harder to explain to their executive teams. Insurers, for their part, may see long-time policyholders buy less limit or leave altogether.

Å˽ðÁ«´«Ã½Ó³»­ market conditions ahead appear to be stabilizing. Swiss Re forecasts that U.S. property and casualty insurers will see to 5% in 2025 and to 4% 2026, following a 10% average in 2024. The easing of economic inflation should help insurers’ results, but social inflation continues to drive claim costs in liability lines.

What brokers can do

A long-held belief in the insurance industry is that, during hard market cycles, the underwriter sets the price, while in soft markets, the broker does. This may not be strictly true anymore, as insurance companies invest in technologies and analytics to improve risk selection and pricing. Nevertheless, brokers are essential partners in bringing business to underwriters.

Placement strategies that leverage strong relationships to maximize brokers’ compensation while serving clients’ needs are prudent ways to maintain growth at any point in a market cycle. It’s not unlike dollar-cost averaging in investing. By focusing on opportunities to derive value, brokers that optimize their placements can get the best results over the long term.

There are systems, like Broker Insights’ VISION platform, that enable brokers to test placement scenarios to see the benefits of different approaches, before deciding which ones to implement.

Cycles may lengthen in the future, but brokers will still need to navigate prevailing conditions in procuring coverage for their clients. In other words, the most successful brokerage firms will be those that enhance their service and value, to both clients and insurers. Consolidating placements with insurers that account for significant shares of a firm’s revenue and profit is a sensible way to maximize both.

Travis Shank is President of U.S. Operations at Broker Insights USA, a division of Dundee, Scotland-based Broker Insights Ltd., a leading provider of data analytics and market insight for the commercial insurance industry. Broker Insights was founded in 2018 to transform the commercial insurance industry through data-driven decision-making and is available in all 50 states. As a global organization, Broker serves brokers and carriers accounting for more than one-third of U.K. commercial gross written premiums. For more information, please visit .

Topics Trends