How lawyers can support insurers’ profitability in a softening market

As RVS2025 begins in Monte Carlo, the industry mood is clear: the market may be softening. But to be precise, this isn’t a return to the pre-pandemic ‘soft cycle’ era. It’s more a case of softening within a hard market. Underwriting discipline remains, across most business lines, but competition is rising and pressure is building to broaden coverage and reduce costs.

So, how should the market respond?

Opening the soft-cycle playbook

In past soft markets, profitability often depended on trade-offs – higher retentions, cheaper reinsurance, cost-cutting, and reserve releases – often against a backdrop of low investment returns and thin technical pricing.

Today is different. Post-Covid, in an inflationary world with supply-side pressures, strict underwriting standards have been reinstalled. Declining unprofitable business, sticking to technical pricing, and maintaining disciplined risk selection remain non-negotiable.

That said, managing softening conditions may still require:

• Higher retentions and co-participations to protect pricing integrity
• Structural innovation through multi-year covers or parametric products
• Diversification across geographies and product lines
• Relationship leverage to retain business without eroding terms

These strategies allow capacity to be offered without wholesale concessions.

Claims and legal strategy – the overlooked tool

In true soft cycles, another lever has always existed: a harder-nosed focus on claims management. Legal spend, often seen as a cost, can in fact be a profit protection tool, containing claims inflation and reinforcing contract certainty.

Historically, the market avoided leaning too heavily on this. But post-Covid, external lawyers have re-established their relevance. Why? Because when Covid hit, the market faced:

• Unforeseen exposures from government-imposed lockdowns
• Regulatory and political pressure for rapid, policyholder-friendly outcomes
• Complex aggregation and reinsurance questions
• Fresh geopolitical shocks, from the Ukraine conflict to inflation and supply chain disruption

Courts, too, have made it clear they will facilitate speedy, sometimes market-wide, coverage determinations. Against that backdrop, legal input became not optional, but essential.

Keeping lawyers relevant

The market has now become used to legal guidance in turbulent times. As softer conditions start to nibble away at margins, using lawyers strategically – to contain claims costs, manage disputes, and enforce discipline – is a ready-made tool to complement more traditional soft-cycle strategies.

It won’t replace underwriting discipline, structural innovation, or diversification. But it can materially support them.

The question is not whether lawyers are relevant; they are. The question is: will the market embrace them as a proactive part of its softening-cycle strategy?