Any guesses as to when this soft commercial market cycle will end?

Canada’s softening commercial market is expected to last until at least the end of 2026, although how much longer is anyone’s guess, industry panellists and audience members predicted in a Canadian Underwriter webinar, ‘Mastering the Market Cycle.’

“I don’t think it’s measurable in an exact timeframe,” panellist Brad Murdoch, managing partner at the brokerage Ferrari & Associates replied Wednesday, when an audience member asked panellists for how long the current soft cycle in commercial lines might last. “Whenever it changes, it’s going to change.

“I mean, personally, I don’t think it’s going to be 2026. I think it’ll be 2027. But again, it all depends on what happens with catastrophic loss, interest rates, and things of that nature.”

Jatinder Bassi, president of Echelon Insurance, agreed the current softening cycle in commercial lines appears likely to last until at least next year. But he added a number of factors — reinsurance rates and natural catastrophe events among them — determine the duration of the cycle.

“Various KPIs [key performance indicators] we look at to determine when a market’s going to shift are not leading towards that shifting anytime soon,” Bassi said. “Definitely. I agree with Brad and [Insurance Brokers Association of Canada president] Brett [McGregor] that 2026 is likely not going to happen.

“Does it happen in 2027? That’s to be seen…If something happens in the political environment or economic environment, I think that can [change things] very quickly.”

CU put the same question — how long do you think the current market softening in commercial lines will last? — to the webinar audience. More than 230 property and casualty insurance professionals attended the webinar.

Most (33%) guessed commercial lines softening would last until at least 2027 Q2. Twenty-eight percent predicted it would last until the end of 2027, while another 28% thought it would stick around only until the end of 2026.

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Applied Systems published its Canadian Commercial Rates Index a week ago. It references data transactions from more than 22,000 transactions per quarter, showing the annual rate increases in most of Canada’s commercial insurance lines have dropped by more than half over the past two years.

McGregor noted the onset of the soft commercial market cycle was unexpected.

“After one of the hardest markets I’ve ever experienced in my career, starting in about 2019 and lasting through COVID, [the commercial market] is softening in a way that makes it challenging for brokers and consumers,” McGregor said. “I think because it’s softening in certain segments that I would say got hit pretty hard through the hard markets. So, after rolling out double-digit [rate] increases for three, four or five years, now suddenly we’ve got customers that are being offered 50%, 60% discounts from where they were the year before.

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“So that makes it challenging for brokers, and it really makes it challenging for the industry. I think it’s hard on our reputation when we’ve got big ups and downs like that.”

McGregor noted the CU webinar poll didn’t include an option for “Who knows?” when the soft market cycle ends. But he added he hopes it will end soon.

“I think the hard work that was done through the hard market, of getting to something resembling rate adequacy, we’re now giving up that work that was done. Those were a lot of hard conversations.

“To be going backwards like this, and going backwards in a way that I don’t think is sustainable, I hope it ends sooner rather than later.”

David Gambrill

David has twice served as Canadian Underwriter’s senior editor, both from 2005 to 2012, and again from 2017 to the present.