The UK insurance market has continued to display soft conditions in 2025, according to Aon's latest UK Insurance Market Outlook.
Aon reported that premiums across most insurance lines have declined between -11% and -20%, except for motor insurance, where rates are still rising, albeit at a slower pace. Underwriting flexibility has increased, with insurers offering broader coverage, higher limits, and stable deductibles.
“We see no reason why the current market conditions will not continue, certainly for the short term, and even accelerate and soften further in some areas as we go into the second half of this year,” Aon UK head of London Broking, Commercial Risk Josh Webb (pictured above) said.
Aon also noted that macroeconomic factors such as trade tariffs and ongoing geopolitical instability remain potential disruptors to the insurance market
Aon's observations on soft market conditions also align with broader shifts in UK insurance activity. A record-breaking £70 billion in pension risk transfers is expected to take place in 2025, as many defined benefit pension schemes move to offload liabilities to insurers.
This surge is attributed to strong insurer funding positions and favourable conditions in government bond markets, which have made such transfers more cost-effective for pension trustees. The increase in pension deal volume has also bolstered demand for insurance products and services.
The report further links the improved buyer conditions to recent performance trends within the sector. Insurer results over the past several quarters have shown notable underwriting profitability, reversing the pattern of weaker results from 2017 to 2020, when a series of natural catastrophe losses significantly affected the sector.
The decline in combined ratios in recent years has contributed to increased competition and pricing flexibility, with many major insurers returning to profit in their core portfolios.
In the construction ‘all-risks’ market, premiums for standard four-walls projects have dropped by around -20%, supported by both established and new capacity providers. According to Aon’s report, complex engineering risks are priced flat, with underwriters exercising greater caution.
Professional indemnity (PI) insurance has also seen continued softening in 2025. Premiums have declined between -5% and -15% for large multinational clients and between -10% and -20% for mid-market firms. Aon notes that increased insurer competition has led to broader cover, larger shares of risk, and fewer exclusions.
Meanwhile, motor fleet rates increased in Q1 2025 but at a slower pace compared to previous periods. Claims inflation, driven by repair costs, parts, and labour, remains a central issue, though signs of moderation are emerging. Aon projects that geopolitical influences continue to affect supply chains and may influence pricing trends in the future.
The liability market has maintained soft conditions with premium reductions averaging -11% to -20% for large, risk-managed businesses and -11% to -25% for mid-market insureds. Aon highlights that competition among insurers has resulted in further rate reductions, extended terms, and increased differentiation on service and multinational capabilities.
That said, US exposure, particularly related to auto, remains a concern for some insurers.
Property insurance rates have also declined, with reductions between -11% and -20% in most cases. Some premiums are approaching levels last seen before the hard market phase. Additional capacity has supported broader terms and long-term arrangements, Aon says.
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