From Strong Returns to Sustainable Advantage: What Insurers Should Do Next as Market Conditions Change

From Strong Returns to Sustainable Advantage: What Insurers Should Do Next as Market Conditions Change
August 17, 2026 7 mins

From Strong Returns to Sustainable Advantage: What Insurers Should Do Next as Market Conditions Change

From Strong Returns to Sustainable Advantage: What Insurers Should Do Next as Market Conditions Change

Insurers' return on equity reached 16.8% in 2025, its highest level since 2009. But premium has growth slowed and insurers face a new challenge: sustaining growth and delivering consistent performance through the cycle.

Key Takeaways
  1. Profitability has reached a new peak. Return on equity reached 16.8% in 2025, the highest level since Aon began tracking the cohort in 2009, creating strategic options for sustainable profitable growth.
  2. Growth is becoming harder to sustain. The gap between growth and profitability continues to widen, creating a different operating environment and new strategic questions for insurers.
  3. As favourable market conditions fade, outperformance will depend on avoiding the pitfalls that erode value – such as overestimating growth, misallocating capital and failing to make effective use of AI – while making better decisions on growth and capital.

One Year Later: What’s Changed?

Aon's Strategy and Technology Group analyses the performance of 120 global property and casualty insurers to assess how profitable growth outcomes are evolving through the market cycle.

Last year, we argued that insurers needed to balance growth, profitability, capital and resilience in a market defined by inflation, catastrophe losses, capital constraints and significant rate correction. We also continue to reinforce the seven traits shared by insurers that consistently outperform through the cycle.

Twelve months later, many of those pressures remain. But the question has evolved. Our latest analysis suggests insurers are entering a new phase of the cycle where profitability continues to reach new heights, but future growth will be harder to sustain. At the same time, the cycle is becoming increasingly fragmented, with casualty, property and reinsurance markets beginning to follow different trajectories. As broad pricing tailwinds become less reliable, future performance is likely to depend less on market momentum and more on strategic choices, disciplined execution and effective performance management.

From Hard Market Returns to Sustainable Advantage

From Strong Returns to Sustainable Advantage: What Insurers Should Do Next as Market Conditions Change Chart

Our updated market-positioning analysis shows not just who improved, but how the market has shifted:

  1. Profitability remains exceptionally strong. Return on average equity (RoAE) reached 16.8% in 2025, the highest level observed since Aon began tracking the cohort in 2009 and the fifth consecutive year of improvement since the downturn in 2020. Continued growth in underwriting income was the principal driver of stronger returns, supported by a benign catastrophe year, improvements in underwriting performance and favourable market conditions that may not last.
  2. Fewer carriers are achieving sustainable growth in returns. the proportion of carriers increasing RoAE year-on-year declined from 74% to 60%, suggesting that gains are becoming less broad-based as the cycle evolves.
  3. Underwriting performance is at a decade high. The combined operating ratio (COR) improved to 91.1%, the lowest level of the decade.
  4. Growth is becoming harder to sustain. Premium growth declined for a fourth straight year to 5.2%, below the decade average and less than half the level seen in 2021. The gap between growth and profitability continues to widen, creating a markedly different operating environment from earlier in the cycle.
  5. Performance is diverging. The spread of combined ratios and RoAE widened across the different segments in property and casualty, with globally diversified and specialist carriers continuing to perform strongly.

Stronger industry profitability does not mean all insurers are equally well positioned for the next phase of the cycle. Some have converted favourable pricing conditions into structurally stronger returns. Others remain constrained by catastrophe exposure, capital intensity, operating complexity or lack of differentiation.

The question is no longer whether insurers can capture the benefits of favourable market conditions. It is: how can they sustain profitable growth as the hard-market tailwinds fade and the opportunity to rely on pricing momentum diminishes?

Quote icon

The hard market rewarded many different strategies. The next phase of the cycle will be less forgiving. The insurers that outperform are likely to be those that combine disciplined growth choices with relentless execution.

Paul Campbell
Global Growth Officer, Strategy and Technology Group

5 Pitfalls for Insurers to Avoid in the Next Phase of the Cycle

  • 1. Don't Confuse Strong Returns with Sustainable Growth

    The findings point to a clear tension: profitability has improved significantly with RoAE and COR reaching decade-leading levels, yet premium growth continues to slow. Strong earnings should therefore be viewed as an opportunity to build future advantage, not as a guarantee of sustainable growth. Not all of the recent improvement in returns is likely to be structural. Strong underwriting income has benefited from favourable market conditions, including benign catastrophe activity and cyclical tailwinds that may not persist indefinitely. Leaders therefore need to distinguish between earnings improvements that reflect enduring capability advantages and those that are more dependent on market conditions.

    Leaders should ask:

    • Are current returns sustainable?
    • Which earnings drivers are structural?
    • Which are cyclical?

    In practice: Focus on identifying which sources of earnings are structural and building growth plans that do not depend on continued rate increases.

  • 2. Don’t Chase Premium Growth at Any Cost

    As growth slows, profitable growth will increasingly depend on where insurers choose to compete and how effectively they deploy capital, underwriting expertise and distribution capabilities. Future leaders are likely to be more selective, prioritising opportunities that combine profitability, resilience and differentiated client relevance.

    Leaders should ask:

    • Where do we have a genuine competitive advantage?
    • Which opportunities create both profitability and resilience?
    • Are we pursuing growth for value creation or for scale?

    In practice: Prioritise growth opportunities where the organisation has a clear opportunity to win and where resilience, relevance and profitability reinforce one another.

  • 3. Don’t Treat Capital as Just a Safety Net

    Stronger profitability has created greater strategic flexibility. Leading insurers will increasingly use capital as an active performance management tool, balancing growth ambitions with flexibility, resilience and return optimisation. The question is how effectively that flexibility is deployed to support future growth.

    Leaders should ask:

    • Are we deploying capital to its highest-value opportunities?
    • Does our capital structure support our growth ambitions?
    • Could reinsurance or alternative capital unlock additional flexibility?

    In practice: Use capital as a strategic lever to improve growth, resilience and returns, rather than simply a constraint to manage.

  • 4. Don’t Underinvest in People and Technology

    As pricing momentum becomes a less reliable driver of performance, competitive advantage will depend increasingly on an organisation's ability to execute, adapt and continually improve decision quality. Future leaders will invest not only in technology, but also in the underwriting, operating and talent capabilities required to translate strategy into measurable performance.

    Leaders should ask:

    • Do we have the digital and organisational capabilities needed to execute our strategy successfully?
    • Which investments and strategic transactions will have the greatest impact on future performance?
    • Are we building competitive advantage faster than market conditions are changing?

    In practice: Prioritise the talent, technology and operating capabilities that improve execution, decision quality and long-term earnings power.

  • 5. Don’t Let AI Become Someone Else’s Advantage

    As market conditions diverge and performance gaps widen, insurers need new sources of competitive advantage. AI has the potential to improve underwriting decisions, enhance risk selection and increase productivity across the value chain. The risk is not simply failing to adopt AI, but allowing competitors to make faster, more informed decisions and build advantages that become increasingly difficult to close.

    Leaders should ask:

    • Where could AI improve underwriting decisions, productivity or portfolio performance most significantly?
    • Are we using AI to enhance decision-making and reimagining how we work, or simply automating existing processes?
    • If a competitor successfully scaled AI across the business tomorrow, where would we be most vulnerable?

    In practice: Focus AI investments on improving underwriting quality, decision-making and operational effectiveness rather than technology adoption alone.

The hard market restored profitability. It did not eliminate the need for differentiation.

From Strong Returns to Sustainable Advantage

Insurers now enter the next phase of the cycle from a position of considerable strength. Yet sustaining today’s levels of profitability will become increasingly challenging as growth slows, pricing momentum moderates and market conditions diverge across segments.

The winners will not be defined by who benefited most from favourable conditions, but by who used those conditions most effectively to build sustainable advantage.

Aon’s Thought Leaders
  • Paul Campbell
    Global Growth Officer, Strategy and Technology Group
  • Brandon D. Miller
    Consulting Director, Strategy and Technology Group

General Disclaimer

This document is not intended to address any specific situation or to provide legal, regulatory, financial, or other advice. While care has been taken in the production of this document, Aon does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the document or any part of it and can accept no liability for any loss incurred in any way by any person who may rely on it. Any recipient shall be responsible for the use to which it puts this document. This document has been compiled using information available to us up to its date of publication and is subject to any qualifications made in the document.

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