Weird breaker panel splice 200amp service to 125amp?
I can’t see the gauge or type of wire in the wire coming in or to the breaker. 

If the splice is a compression listed for copper / aluminum this may be what they did to extend the wiring with the feeder being aluminum (possibly).

I do not like panels being put in with the main at the bottom , there was no reason for it in this case.  If the wire is sized correctly this could be totally legit because the main breaker is the protection for the system. 

If the feed is copper and just downsized for the 125 a standard crimp would be ok but if aluminum to copper I would want to verify a listed crimp or bolt and deox or anti oxide compound was used If my home.  Oregon and Washington have slightly different codes but use the NEC for services so without some other issue  the 200 amp permit means whoever did this was Penny wise pound foolish as a 200 amp panel would have only costed a few dollars more.