When the insurance market softens, the instinctive response is to cut costs. Expense programmes return, hiring slows and growth targets are quietly revised down while organisations wait for the cycle to turn.
That playbook is being tested. Rates are falling across most lines and regions, expense ratios are rising, and two decades of cost programmes have done little to change the industry's underlying cost base. Boards are no longer asking leaders to choose between protecting margin and finding growth. They expect both.
This article looks at why expenses are back on the board agenda, why cutting alone has not delivered, where growth is still coming from, and what boards should look for in the leaders trusted to manage the balance.
Why Expenses Are Back on the Board Agenda
The softening market is now well established. According to Marsh's Global Insurance Market Index, global commercial insurance rates fell by an average of 5% in the third quarter of 2026, the ninth consecutive quarterly decline. Rates fell 8% in the UK and 6% across Canada, Europe and Asia.
While rates rose, strong pricing absorbed rising costs. That cover is now thinning. In the US property and casualty market, other underwriting expenses climbed by more than 7% in 2025, pushing the industry expense ratio up by around 0.6 points. Over the same period, net written premium growth slowed from 8.8% to 4.8%.
The London market shows a similar pattern. Lloyd's reported gross written premium of £34.7bn for the first half of 2026, up 6.9%, and a combined ratio of 90.8%. Yet its expense ratio rose to 36.4% from 35.8%, driven by higher acquisition costs and profit-related commissions.
When rates fall, the loss ratio stops hiding the cost base. Expense discipline moves from a finance team metric to a board-level question about leadership.
Why Cutting Alone Has Not Worked
The industry has been here before. Cost programmes are a familiar feature of every soft market, yet the underlying cost base has barely moved.
McKinsey's July 2026 report, How AI Will Reshape the Economics of Insurance, found that insurance cost ratios are 10% higher globally than in 2005, while other sectors have reduced theirs materially. The average P&C expense ratio has sat between 27% and 32% for two decades, with leaders running below 22% and laggards at 32%. Labour productivity did improve, by 14% in P&C and 24% in life, but the gains were absorbed elsewhere. As McKinsey puts it: “Efficiency improved. Average industry costs increased.”
Bain reaches a similar conclusion. Its July 2026 analysis, Strong Momentum in Insurance, but Structural Challenges Remain, notes that while direct written premiums doubled over the past decade, expense ratios dropped by only one percentage point.
The current wave of restructuring carries its own risk. Across industries, Bain's 2026 Automation and AI Pathfinder Survey found that nearly 40% of companies measuring AI cost savings achieved reductions below 10%. Where headcount is reduced before new systems can do the work, organisations remove capacity they still need.
EY's 2026 Global Insurance Outlook makes the leadership point directly. Cost efficiency is critical in a softening market, but firms that “overeach and cut indiscriminately will limit future opportunities” when conditions improve.
The lesson for boards is that cost reduction run as a finance exercise rarely lasts. The organisations that make it stick treat it as a leadership decision about what the business should look like when the cycle turns.
Where Growth Is Still Coming From
A softening market does not mean the absence of growth. It changes where growth comes from and what it costs to win.
The Lloyd's figures show the shift clearly. Premium grew in the first half of 2026 despite falling prices, driven by volume growth of 15.8% from new and existing syndicates. Marsh also points to expanded capacity from managing general agents as one of the forces shaping the market. Growth is increasingly found through new business, specialist segments and new distribution models, rather than through rate.
That makes the operating model the growth lever. As Martin Henley, CEO of insurance technology firm mea Platform, put it in September 2026: “growth in this market is really going to come from the operating model, not so much the rate.” An organisation that can quote faster, process more submissions and serve clients at lower cost can grow profitably where competitors cannot.
Most technology investment is not yet set up to deliver this. BCG reports that industry AI spending as a share of revenue will triple in 2026, yet just 38% of P&C insurers are generating value at scale from AI in core workflows. KPMG research reported in ScienceSoft's Q3 2026 Insurance AI Trends found that nearly half of insurers' AI budgets target operational and back-office efficiency, while only 5% to 10% goes towards new products and revenue models.
The same investment can cut cost or create capacity for growth. Which one it delivers depends largely on the leaders directing it.
How the Pressure Differs Across Regions
The tension between cost and growth is global, but it shows up differently in each market. Leaders moving between regions, or overseeing several at once, need to understand how.
North America. The US is softening more slowly than other regions. Marsh reported US composite rates down just 1% in Q3 2026, with casualty still under pressure. Yet the cost challenge here is the most acute: McKinsey found that operating expenses as a share of revenue have risen 60% in North America since 2005, against 17% globally. For North American leaders, expense discipline and reserve discipline are now examined side by side.
UK and the London Market. UK rates fell 8% in Q3 2026, faster than the global average, while acquisition costs continue to rise. Lloyd's chief executive Patrick Tiernan summed up the balance in the market's 2026 half-year results: “Underwriting discipline and innovation are the keys to maintaining outperformance and quality of earnings.” In London, discipline is not presented as a brake on progress. It is the condition for it.
Asia Pacific. Rates fell 6% across Asia and 14% across India, the Middle East and Africa, the steepest regional fall Marsh recorded. At the same time, APAC remains one of the industry's main growth stories. Many organisations are responding by rethinking regional structures, removing layers of oversight and consolidating regional leadership roles, while investing in country-level leadership closer to clients. This is cost efficiency achieved through structural design rather than cuts across the board.
Life and Health. In Life, private capital has brought a sharper focus on capital efficiency, but McKinsey notes that it has not touched most other parts of the business beyond the balance sheet and investment management. Operating cost is the next frontier, and it adds to the pressures already reshaping Life leadership, as we explored in Why Succession Planning Has Become the Most Pressing Issue in Life Insurance.
What Boards Should Look For
In Hiring Insurance Leaders for a Softening Market, we set out the tests boards use to judge whether a leader has been through a full market cycle. Managing expenses and growth at the same time asks for a related but distinct set of capabilities. We believe five matter most.
1. Capital allocation judgement. The strongest leaders know which lines, regions and channels deserve investment and which should shrink. They make those calls with data and stand by them, rather than spreading cuts evenly to avoid difficult conversations.
2. Cost discipline that protects capability. Taking out complexity, duplication and legacy cost is different from taking out the people and skills the next growth phase depends on. Boards should look for leaders who can explain what they chose not to cut, and why.
3. Operating model redesign. With AI budgets rising and value at scale still rare, the differentiator is the ability to turn technology spend into a lower cost per policy and greater capacity, rather than adding new systems on top of old processes.
4. Selective growth. In a softening market, profitable growth comes from knowing where pricing still holds, where specialist expertise earns a margin and where new distribution opens access. Leaders who chase top-line growth across the board tend to give back margin later.
5. Bringing the organisation with them. Cost programmes and transformation both depend on people. Leaders who can explain the case for change, keep key talent engaged and rebuild confidence after restructuring deliver results that last.
These capabilities are best tested with evidence, not intent. Questions boards can ask include:
- Tell us about a cost programme you led that also funded growth. What did you protect, and what did you stop?
- Which part of your portfolio did you choose to shrink, and how did you make that case to your board?
- Where has technology investment changed your cost per policy or your capacity to grow, and how did you measure it?
- How did you keep your strongest people through a period of restructuring?
What This Means for Leadership Teams
The balance between cost and growth is not owned by one executive. It is changing the shape of senior roles across the leadership team.
The CFO and COO roles are converging on transformation. Finance and operations leaders are increasingly judged on whether they can redesign how the business runs, not only on whether they can control spend. The ability to connect cost decisions to capital, technology and growth is becoming central to both briefs.
Fewer layers mean broader remits. As organisations remove layers and consolidate regional roles, the leaders who remain carry wider responsibility. That raises the bar for judgement, communication and the ability to lead teams across markets.
Succession needs a cost-and-growth lens. Many current leaders built their careers during an extended hard market, when rate did much of the work. Boards planning succession should ask whether the next generation of leaders has had the chance to manage cost and growth together, and where that experience can be built before it is needed.
Discipline Funds Growth
The soft market will reward organisations that stop treating expense discipline and growth as a choice. The best leaders treat cost discipline as the way growth gets funded, and growth as the reason discipline matters.
Two decades of data show that cutting alone does not change an insurer's economics. Leadership does. The organisations that treat this as a leadership question, rather than a finance exercise, will be best placed when the cycle turns.
Eliot Partnership is the only global executive search firm dedicated exclusively to the insurance and reinsurance industry. We work with the world’s leading insurers, reinsurers, brokers, MGAs and specialty platforms to build leadership teams equipped for what’s next. To speak with our team about MGA leadership hiring, succession planning, or executive search, visit eliotpartnership.com.
