South Africa’s insurance market has entered what appears to be a sustained soft market phase, characterised by increased capacity, intensifying competition, broadening coverage terms, and pressure on premium rates. This marks a significant shift from the hard market triggered by catastrophic events and economic uncertainty in recent years. While this environment offers short-term benefits for buyers, it introduces strategic, financial and operational challenges for insurers, particularly as broader economic conditions shift and regulatory expectations tighten.

Drawing on current market observations, here are the key dynamics shaping the soft-market outlook through 2028, and what industry leaders should be focused on.

Key Indicators of a Soft Market

  • Lower or Flat Premiums – Downward pressure on rates, especially in commercial property and casualty lines.
  • Broader Coverage Terms – Fewer exclusions and more generous policy wording.
  • High Capacity – Global reinsurers and local carriers injecting surplus capital, creating competitive dynamics.
  • Aggressive Negotiations – Brokers securing favorable deals for clients.

Why Has the Market Softened?

  • Improved Capital Positions: Insurers rebuilt reserves after prior losses.
  • Reduced Catastrophic Losses: Fewer large-scale events in 2024–2025 compared to previous years.
  • Global Reinsurance Stability: Increased capacity and appetite for risk from international markets.

Implications for Stakeholders

  • For Buyers: Opportunity to lock in favorable rates and broader coverage.
  • For Insurers: Margin pressure and risk of underpricing which makes discipline critical.
  • For Brokers: Ability to deliver enhanced value through competitive placements.

How Long Will It Last?

The soft cycle is expected to persist through 2026, barring major loss events or economic shocks. Historically, soft markets last 2–4 years, but volatility remains a risk.

South Africa vs Global Trends

Globally, markets are also softening after a prolonged hard cycle (2019–2023). South Africa’s shift is more pronounced due to strong local competition and surplus capacity.

Insurance penetration [(Total insurance premiums / GDP) × 100%.]: South Africa at 11.5% vs global average of 6.8% is one of the most mature emerging markets. It compares favourably with other mature markets, including the United Kingdom (11.8%), the United States (7.4%), China (4.3%), India (3.7%), and Hong Kong (18%) for 2025.

Distribution Dynamics – Critical for Brokers

Brokers face mounting pressure from clients to deliver “better deals,” and this pressure flows directly to insurers. At the same time:

  • Digital & Hybrid Channels are compressing distribution costs.
  • Commission Sensitivity is rising as margins tighten.
  • Competition is shifting toward value-added services rather than price alone.

Brokers who articulate value through risk engineering, analytics, and advisory will outperform.

Strategic Moves: How Insurers Should Position Themselves

Defensive Moves

  • Tighten pricing governance and minimum margin floors
  • Strengthen claims and reserving oversight
  • Push automation and straight-through processing to reduce cost-to-serve
  • Reassess long-tail exposures and limit structures

Offensive Moves

  • Selectively capture profitable market share where underlying risks are stable
  • Lock in multi-year reinsurance protection while capacity is favorable
  • Prepare for a likely rise in M&A between 2026–2028
  • Simplify product sets and bundle strategically to defend renewal books

Executive Red Flags

  • Combined ratio above 101% for two consecutive quarters
  • Reinsurance renewal increases >15%
  • Reserve strengthening beyond 3% of earned premiums
  • SARB rate cuts >100 bps within a year
  • Broker-driven rate reductions above 5%

Bottom Line

The current environment offers opportunities but also challenges. Insurers must balance growth with profitability, while buyers should capitalize on favorable conditions before the cycle inevitably turns. Insurers will need to rely more on cost efficiencies and investment returns to meet earnings targets. The ultimate damage depends on macro variables (interest rates, GDP/inflation) and loss events: in a mild scenario firms can adapt via tighter underwriting and digital efficiency, while in deeper scenarios expect consolidation, capital raises and regulatory focus on solvency and reserving. Insurers should prioritize dynamic capital planning, claim-reserve discipline, and targeted product & distribution strategies now. Overall, the regulator will likely focus on clear articulation of underwriting risk appetite, strong ORSA scenario planning (soft-market stress) and transparent climate-risk disclosures.

Article by Ishmael Mashandudze – Dorcas & Martin Managing Director

With the insurance marketing softening, effective underwriting cycle management is no longer optional – it is critical. At Dorcas and Martin , we provide the expertise and tools to help you navigate this challenging environment with confidence.

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