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Risk finance solutions in a soft market cycle: Unlocking strategic opportunity

A soft insurance market offers more than lower premiums. Alfons van der Vyver explains why organisations should use favourable market conditions to invest in risk finance solutions, such as first-party cell captives, to strengthen resilience and reduce long-term dependence on traditional insurance cycles.
Written by
Alfons van der Vyver
Published on
July 17, 2026
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The corporate insurance sector is currently experiencing a “soft market” phase within the underwriting cycle. This phase is characterised by abundant insurer capacity, intensified competition among carriers, and consequently lower premium rates alongside broader coverage terms. Insurers, in pursuit of market share, continue to offer favourable pricing and relaxed underwriting conditions, creating an environment that is highly advantageous for corporate buyers.

For many organisations, this translates into immediate cost savings. However, leading risk finance professionals recognise that a soft market should not merely be viewed as an opportunity to reduce insurance spend. Instead, it represents a strategic inflection point. Forward-thinking corporates are increasingly redeploying premium savings into alternative risk financing structures that build long-term resilience, rather than allowing these savings to flow directly into short-term financial performance.

Now is the time!

A soft market is, in fact, the ideal time to establish or expand a risk finance strategy. Lower premium costs enable organisations to capitalise structures more efficiently, while still securing competitively priced excess layers and reinsurance protection. Importantly, the cyclical nature of the insurance market means that current conditions are temporary. Soft markets inevitably give way to harder conditions where premiums rise, underwriting tightens, and capacity becomes constrained. Organisations that have not acted during favourable periods often find themselves exposed to increased costs and reduced flexibility.

One of the most effective risk financing mechanisms available to corporate clients is the first-party cell captive. This structure represents an evolution of traditional self-insurance, enabling businesses to formally retain and manage risk within a regulated insurance framework.

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"A soft market should not be viewed as a period of complacency, but as a window of strategic opportunity."

Alfons van der Vyver
Executive Head: Risk Finance Solutions, Centriq Insurance Company Limited

At its core, a first-party cell captive allows a corporate to participate directly in the insurance value chain by underwriting its own risks within a licensed insurer’s cell structure. The corporate operates a ring-fenced cell, contributing capital and benefiting from underwriting performance, without the complexity, cost, and regulatory burden of establishing a standalone captive insurance company.

Key features of a first-party cell captive include:

  • Formalised risk retention, enabling structured participation beyond conventional deductibles
  • Access to underwriting profits, allowing surplus accumulation from favourable claims experience
  • Customised coverage, tailored to the organisation’s specific risk profile and exposures
  • Access to reinsurance markets, particularly for catastrophe or excess layers
  • Operational simplicity, supported by the insurer’s regulatory, governance, and administrative infrastructure

In essence, the structure enables corporates to operate with many of the financial advantages of an insurer – retaining risk, earning investment income on premiums, and participating in underwriting returns – while leveraging the expertise and scale of an established insurance platform.

Self-funding

The strategic rationale for implementing such a structure is strongest during a soft market cycle. Premium savings generated in the traditional insurance market can be redirected to capitalise the cell, effectively creating a self-funding mechanism for long-term risk financing. This approach not only builds financial resilience but also progressively reduces dependence on the volatility of commercial insurance pricing.

As the underwriting cycle inevitably turns, organisations that have invested early in risk finance solutions will be better positioned to manage cost escalation, maintain coverage continuity, and exert greater control over their risk portfolios.

In conclusion, a soft market should not be viewed as a period of complacency, but as a window of strategic opportunity. It is precisely at this point in the cycle that corporates should act, using savings on conventional premiums to establish robust risk finance structures such as first-party cell captives. By doing so, organisations can transform short-term cost advantages into long-term strategic capability, reinforcing the principle that a soft market is indeed the ideal time to implement a disciplined and forward-looking risk finance strategy.

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