Opinion: What to expect in insurance market for the remainder of ’25

Hunter Johnson

The U.S. commercial property insurance market in 2025 is navigating a complex and increasingly volatile environment shaped by a convergence of natural disasters, nuclear verdicts and the ripple effects of trade tariffs. While the industry has shown resilience in terms of underwriting results, the underlying risks and external pressures are forcing carriers and insureds alike to reevaluate pricing strategies, risk appetite and coverage adequacy.

Recent underwriting performance provides a mixed picture. In 2024, the broader property and casualty insurance sector recorded a substantial improvement, with the statutory combined ratio improving to 96.6% from 101.8% the previous year – the most notable year-over-year gain in over a decade. This improvement reflected stronger underwriting discipline and improved investment returns. However, commercial property lines diverged from this trend. The net combined ratio for commercial property deteriorated by 3.3 points in 2024, with much of the strain attributed to a series of severe natural disasters, including Hurricane Milton. Catastrophe-related losses continue to undermine underwriting profitability and have prompted carriers to increase deductibles, tighten terms, and reduce capacity in high-risk geographies.

Natural disasters have become a central driver of volatility. In 2024, the U.S. experienced 24 separate weather and climate disaster events that each caused over $1 billion in damages. Convective storms – which encompasses perils like tornadoes, straight-line wind, lighting and hail – represented 70% of global insured losses in the first half 2024. According to a Nationwide Agency Forward survey, 1 in 3 commercial properties in the U.S. has suffered damage from a natural disaster in the past five years. That number climbs to more than 50% in wildfire-prone states and nearly two-thirds in hurricane zones. These events not only test the insurance market’s resilience but are also reshaping the geographic underwriting landscape.

At the same time, commercial insurers are contending with the persistent threat of “nuclear verdicts” – jury awards that far exceed historical norms. The increasing frequency and severity of these claims are exerting upward pressure on casualty insurance rates and driving a wave of underwriting scrutiny and uncertainty. In 2024, general liability premiums increased by an average of 4.1%, coinciding with a 33% rise in reported claims. Carriers are responding with heightened diligence in loss history evaluations, more restrictive appetites and more conservative policy structures, particularly in litigious jurisdictions.

Adding further complexity to the current market is the reemergence of trade tariffs as a macroeconomic disruptor in the first quarter of 2025. The recently imposed tariffs on construction materials such as steel and aluminum have the potential to increase costs by as much as 25%. This directly impacts commercial property insurers by driving up the replacement and repair costs of insured structures. Higher claims severity is a likely outcome, and insurers are already factoring these inflationary pressures into pricing models. The American Property Casualty Insurance Association estimates that auto-related tariffs alone could increase industry claims costs by up to $61 billion annually. For insurers, navigating this terrain is further complicated by the regulatory constraints surrounding rate filings that prohibit excessive rate increases and often lag behind market realities.

Looking ahead, rate expectations remain elevated. While Swiss Re projects a moderation in direct premium growth to around 5% in 2025, down from nearly 10% in 2024, the commercial property, auto and general liability segments are likely to experience continued upward pricing pressure. Rate adequacy for insurers remains a concern, particularly in catastrophe-prone areas and jurisdictions with high litigation risk. Carriers will need to balance their need for sustainable profitability with the growing pushback from commercial policyholders facing affordability challenges.

In summary, the U.S. commercial property insurance continues into 2025 with some positive momentum in broader underwriting performance but remains heavily exposed to macroeconomic risk factors. Natural catastrophes, escalating litigation costs and geopolitical developments like tariffs are all converging to reshape the risk environment, and do not point toward more favorable conditions for policy holders. Carriers must stay agile and data-driven to navigate the year ahead, while insureds should be prepared for continued rate hardening, stricter underwriting, and a renewed emphasis on risk mitigation.

Hunter Johnson is vice president of Alliant Insurance Services Inc., specializing in workers’ compensation, alternative risk financing and complex risk placement. He can be reached at hunter.johnson@alliant.com.