The US property market has entered softening territory over the past year, driven less by improved risk fundamentals than by a surge of capital and a relative absence of major landfalling hurricanes, despite sizeable overall industry losses. Tom Kussurelis (pictured), president of Arrowhead Programs told Insurance Business that the environment felt familiar – and potentially risky.
“It is a soft market, period, hard stop,” Kussurelis said, noting that conditions had shifted rapidly over the past year. By the end of the year, rate pressure was unmistakable.
“Exceptional accounts are able to get better terms and conditions,” he added. “You’re seeing 15, 20, 30% rate reductions depending on the risk. Even average accounts are in the 0% to the –3% to +3% range.”
Industry commentary suggests renewal declines around –15%, while some carriers purchase additional limits at minimal cost, reflecting the depth of available capacity. But Kussurelis emphasizes that pricing softness is a symptom, not the root cause.
At the core of the cycle, he said, is the volume and diversity of capital flowing into insurance risk.
“There’s more capital in all the insurance-linked securities,” Kussurelis explained. “Hedge funds, private equity, family offices are all finding ways to transform that capital into insurance risk, which financially works for them.”
Advanced modeling and structured vehicles have changed the economics, allowing investors to tolerate substantial loss ratios than prior cycles. “All the modeling there produces good returns,” he noted, particularly where fronting fees and layered structures supplement underwriting income.
Recent loss experience amplifies the effect. “We didn’t have a storm last year. Nothing made landfall,” he said, adding that California wildfires had a different market impact than hurricanes. Combined with disciplined pricing during the last hard market, attritional loss ratios have fallen, creating room for aggressive competition.
“That means there’s a lot more capital sloshing around in the marketplace,” Kussurelis said. “That means rates go down. That means terms get broad.”
The abundance of capacity, however, sat uneasily alongside properties increasingly difficult or impossible to insure. Kussurelis framed the issue as one of economics, ethics and broader philosophical responsibility.
“With sophisticated modeling and strong underwriting, we can insure only the best of the best risks,” he said. In catastrophe-exposed states, resilient, modern properties attract coverage, while older or poorly located communities are pushed into alternative markets or left uninsured.
“So where is the line of responsibility between the industry, the consumer and the government?” he asked.
Flood insurance illustrates the disconnect. Despite widespread exposure, most homeowners remain uninsured, even where coverage is available through public programs. “How do you get folks to lean into that in a way that allows insurance to actually operate like insurance should?” he added.
High-value homes present a parallel issue. In markets where multimillion-dollar properties are increasingly common, traditional policy structures often fail to meaningfully balance risk. “People balk at a $10,000 deductible,” Kussurelis said. He suggested layered approaches and greater self-insurance, long standard in commercial lines, had yet to permeate personal lines.
Soft markets, he said, inevitably test underwriting discipline.
“A soft market absolutely puts underwriting discipline at risk,” Kussurelis said. At Arrowhead Programs, which operates exclusively under delegated authority, maintaining carrier profitability remains non-negotiable.
“One of our leaders said… always, always, always maintain profitability for your carrier,” he explained, adding that focus sometimes limits growth or reduces premium, particularly when holding firm on rate adequacy.
Across the broader industry, however, discipline varies. “Not everybody has an existing book of business to benchmark where they were three years ago or five years ago,” he said. “Not everybody has the sophisticated modeling to run previous storms against the current portfolio.”
Competitive pressure could also push pricing below sustainable levels. “We might feel like $0.40 is a good number,” he said, referring to property rates per thousand. “A new entrant writes it for $0.15.” Those decisions, he warned, would be tested when losses return.
“You’re going to find out – the water is going to go out on the beach and you’re going to find out who’s swimming naked,” he said.
For Arrowhead, the mandate is clear: balance growth with discipline, use available capacity to develop new products, and maintain underwriting standards.
“Our role is to keep the numbers right, keep the rate adequacy in place and keep the terms and conditions right,” he said. “The execution task today is managing your business with that reality front of mind.”
