With 2025 on the horizon, the commercial insurance landscape continues to evolve, presenting both opportunities and challenges for business owners. This outlook provides key insights into market trends, emerging risks and strategies to help you navigate the complex insurance market ahead.
Market Overview
The commercial insurance sector is showing signs of moderation, offering relief after years of challenging conditions. Business leaders should be aware of ongoing concerns that continue to influence the market including:
- Rising claim frequency and severity
- Persistent social inflation issues
- Evolving cyber risks
- Continued losses from catastrophic natural disasters
These factors are shaping underwriting decisions and pricing strategies, creating a complex landscape for both insurers and policyholders.
Shift to Excess & Surplus Markets
The E&S insurance market now accounts for an estimated 24% of commercial business in the United States. This shift is driven by several factors including:
- Increased complexity and size of small and mid-size business risks
- Growing casualty risk due to social inflation and technological advancements
- Rising property risk from severe natural disasters
Consider exploring E&S options if your business operates in high-risk industries or faces emerging risks not typically covered by standard policies. The E&S market will offer customized solutions so you can respond quickly to market changes.
Key Trends to Watch for 2025
Extreme Weather Events: Increasing frequency and severity of natural disasters continues with global insured losses from natural disasters consistently exceeding $100 million for the fifth consecutive year. As a result, building climate resilience is no longer an option, but a critical imperative for businesses. To safeguard your operations, consider reviewing and updating your property insurance coverage to address emerging risks and provide sufficient coverage. By proactively addressing climate risk, you can not only mitigate losses but help ensure you stay competitive in the long term.
Geopolitical Risks: Ongoing international disruptions are impacting global supply chains and business operations. This evolving landscape is driving a greater demand for more comprehensive business interruption coverage. Evaluate your policies for the need for political risk insurance, since it can protect your investment from losses due to political events. Also, reassess your supply chains and diversify suppliers to help mitigate the impact of local disruptions.
Cyber Security Opportunities and Risks: As Artificial Intelligence (AI) offers significant opportunities for efficiency and accuracy; it also brings new risks in cyber security. Insurers are grappling with how to cover AI-related risks, while you should develop clear policies and procedures for AI use in your organization.
Outlook by Insurance Line
Commercial Property
Pricing and capacity continue to vary widely based on risk profile and location. Non-catastrophe (CAT) exposed risks are seeing relatively stable conditions, with increases expected to be flat to 10%. CAT-exposed risks continue to face challenges, with increases of +5% to +15%. Focus on accurate insurance-to-value calculations to ensure proper coverage and consider alternative risk financing options if you’re in a high-risk area.
General Liability
Rates are expected to see moderate increases of +1% to +9%, with variation based on industry history. Be sure to work with risk management experts to educate yourself on key market changes affecting your rates and how to respond using loss control measures.
Commercial Auto
Rate increases are expected to range from +5% to +15% as ongoing issues with nuclear verdicts and distracted driving continue influencing the market. Review limits, implement fleet safety programs and consider telematics to potentially secure better terms.
Workers’ Compensation
As one of the most stable lines, workers’ compensation is expected to range from -2% to +2%. However, be aware that medical and wage inflation may drive up costs. Focus on workplace safety and proactive claims management to optimize the most favorable outcomes.
Cyber Security
The cyber insurance market continues to evolve rapidly, with rate changes ranging from -5% to +5% and variations based on your industry. Prioritize robust cyber security measures and regularly update your response plan to secure favorable coverage.
Remember, the key to navigating this complex landscape is a tailored approach considering your unique risk profile and industry-specific challenges. To ensure your business is adequately protected, reach out to UNICO Group. Our team of experienced advisors can provide personalized guidance and innovative solutions tailored to your specific business needs in this evolving insurance landscape.
