‘Know’ Risks Ahead

2026 will again demand a careful balance to navigate market change driven by technological advances, unpredictable weather events and evolving customer expectations.

We believe these five key forces will shape the year ahead.

1. Capital supply

Generally, the strata insurance market softened in 2025. The increased supply of both capital and competition helped ease conditions for many consumers.

There is now significantly greater competition for risk, with underwriting capacity increasing rapidly and more than 10 underwriters currently offering strata products.

We expect one or two new underwriters to launch new products or offer increased capacity into the market this year. The extent to which market players pursue or defend market share, along with any major losses they may face, will determine how disruptive, transformational, and long lasting this shift becomes.

2. Reinsurance resilience

Reinsurance sector financial resilience remains robust, with global capital reaching around $760 billion by September 2025¹. Growth in both traditional and alternative capital providers illustrates strong investor confidence, reinforcing the capacity to absorb rising catastrophe losses.

But climate change remains the primary concern. According to the federal government’s first National Climate Risk Assessment, “no Australian community will be immune from climate risks that will be cascading, compounding and concurrent”. The report warns of more frequent and intense floods, fires, and cyclones, highlighting Australia’s heightened vulnerability from a “substandard built environment”.

The Insurance Council of Australia’s (ICA) President, Steve Johnson, explains, “We must collectively focus on enhancing our response to extreme weather events and, crucially, advocate for greater investment in preventative measures”.

However, demand for reinsurance protection is robust and capacity is plentiful. We still face headwinds, but the reinsurance market is well positioned to support insurers.

3. Increased risk appetite

Insurers assess each risk on its own merits, and what they consider “high risk” can vary.

New market entrants are providing solutions for many harder-to-place risks. While some existing insurers are staying competitive on new, larger, and more complex developments by using increased capacity to offer higher sums-insured limits, further expanding the market.

As underwriters take on larger shares of big and complex risks, fewer individual insurers will be needed on each placement. This will reduce multi-party complexity in negotiating terms and lower claims administration costs required to cover the entire risk. The consequence, however, is that displaced underwriters will pursue new business to replace what they’ve lost.

4. Disruptive technologies

Artificial Intelligence (AI) is changing how risks are evaluated, policies priced and claims handled, providing quicker service, more accurate coverage, and stronger protection. It’s reshaping the industry landscape.

A report from the CSIRO (Australia’s national science agency) and ICA highlights five ways AI can help insurers manage growing risks and improve customer outcomes².

• Automated claims processing: Accelerates claim handling while ensuring high-risk or complex cases are directed to human experts.
• Fraud detection: Protects premiums by identifying suspicious behaviour.
• Enhanced underwriting: Enables more accurate risk assessment and coverage tailored to individuals.
• Natural disaster impact prediction: Provides early warnings to support better preparation and response.
• Operational compliance: Streamlines adherence to regulatory requirements, improving efficiency.

5. Protection gap

Natural catastrophe losses are increasing by 5-7% annually, driven by climate change and urbanisation in high-risk areas³.

• Global economic losses from disasters in 2024 reached an estimated $318 billion, but only $137 billion was insured.

That’s a “protection gap” of 57%, or $181 billion. This gap is especially severe in markets with low insurance uptake.

For example, Hurricane Melissa struck Jamaica in October 2025, causing billions in economic damage. Here, only 20% of residential properties are insured, and 95% of those are underinsured. High premiums, limited financial literacy and informal construction practices all contribute to the shortfall.

Aon has also revealed that 40% of global catastrophe losses were uninsured in the first half of 2025, and the protection gap in some areas was closer to 90%⁴.

In Australia, we also see this gap with cyber insurance, where uptake remains low relative to the level of risk, and it remains a key focus for reinsurers.

Demonstrating value

Evolving market conditions, fluctuating risk appetites, and growing demand for seamless risk-data flows underscore the need to invest in integrated systems and processes across the supply chain.

Forecasts vary on how long current conditions will last and whether rates will level off rather than decline further. Some believe strong underwriting discipline and better access to risk data will limit the downturn, while others expect familiar peaks and troughs, but on a smaller, less disruptive scale.

The intensity of this summer’s storms and cyclones, climate driven loss trends, and fast-changing technology will all shape outcomes. Strong, proactive collaboration between a specialist broker like BCB and a strata manager helps build insurer confidence and enables more accurate risk pricing, delivering competitive and effective cover.

1. Aon: Reinsurance Market Dynamics, January 2026 ↩︎
2. AI for Better Insurance: Enhancing Customer Outcomes amid Industry Challenges, August 2025 ↩︎
3. Swiss Re Institute data ↩︎
4. Aon: Climate and Catastrophe Insight report 2025 ↩︎