OVERVIEW
As the first quarter of 2025 concluded the property and casualty insurance market faces both new and recurring challenges. 2024 brought continued casualty concerns of large settlements, third party litigation funding and nuclear jury verdicts. These concerns remain in 2025 and, in some cases, have intensified. Also unchanged from 2024 is the importance for carriers and brokers to adopt best-in-class technology to improve operational efficiencies. Property reinsurers continue to demonstrate discipline, holding firm on terms and conditions adopted over the last couple of years. While hard market attachment points, policy terms and deductibles are holding for property risks, rates are starting to decrease on loss-free business. Capacity continues to flow into the US property market, driving down pricing and increasing competition, especially in areas where rate increases were abnormally inflated based on prior capacity constraints. While property rates decrease, the E&S market is seeing increased pricing in liability lines to maintain profitability due to social inflation.
The E&S segment has accelerated becoming a larger portion of the overall marketplace over the last few years as displayed in the chart below.
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PROPERTY
We have seen continued softening in the property insurance market leading up to Q1 2025 despite back-to-back hurricanes, Helene and Milton, in 2024. According to Howden’s pricing index, risk adjusted rates for property CAT dropped 8% at the January 1 renewals due to new capacity entering the market and increased competition following the industry achieving underwriting profits over the last two years.
The story for the US property market heading into Q2 of 2025 has once again been claims severity from secondary perils. Unlike 2024, the driver of secondary peril losses in the US has been California wildfire. The 2025 California wildfire losses are pegged in the $30-$40B range (or even more, based on some estimates provided by modelers and brokers), ranking the event the worst North American wildfire in history.[i] The extent that these wildfires will slow or even pause the property market softening remains uncertain. What we do know is that personal lines is expected to be a vast majority of those losses, many affecting writers of high-net-worth business. Commercial lines E&S carriers we’ve spoken to thus far seem to have escaped with relatively modest losses.
We also know that reinsurers and surplus lines carriers are in growth mode after realized underwriting profits over the last two years as they face pressure from investors to grow during what is being viewed a time of rate adequacy. Business continues to flow from the admitted market into E&S as heavily regulated admitted carriers are slow to respond to price rises and often have no choice but to discard business.[ii] January1 property reinsurance renewals showed us that supply generally exceeded demand, but we have heard from many markets that post 1.1 reinsurance renewals could be subject to a firmer cycle due to CA wildfire events. There is still a lot of concern over secondary peril losses as we head into spring when storms and tornadoes are more prevalent. Only time will tell how this will affect rates moving forward.
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CASUALTY
For casualty business, the story differs a bit pertaining to rates. Economic and social inflation continue to lead towards increased indemnity severity and settlement costs. On top of that, carriers are also seeing increases in defense and cost containment expenses. Nuclear jury verdicts continue to intensify and payouts have doubled since 2020.[iii] Reserve strengthening continues on the casualty side for pre-Covid years, and we are seeing more of the same for post-Covid accident years as well. There is still a lot of uncertainty around Covid backlog years.[iv] Liability carriers continue to tighten underwriting guidelines and push rates to account for these trends. Many of the E&S binding authority carriers we have spoken to are optimistic that they will achieve 5 to 15% rate increases in the upcoming year. Some larger increases are expected for excess liability lines, where capacity is also expected to decrease. For 1.1 casualty renewals, better terms were awarded to buyers able to show evidence that their portfolios contained appropriate rate change and reserves [v].
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E&S MARKET GROWTH
Overall, the E&S market continues to thrive as we move into Q2. According to the Alera Group’s annual property and casualty market outlook report, the US property and casualty industry is expected to continue to grow due to improved underwriting results, slowing inflation and higher investment yields. Even as property rates fall, submissions continue to rise for many brokers. The E&S segment growth is outpacing the admitted space. Admitted carriers in the US continue to struggle with difficult state regulatory environments, sometimes restricting them from obtaining adequate rates. There are also several structural factors at play resulting in business shifting to the E&S market, including elevated and high frequency cat losses and a rise in secondary peril events in the short term and increased population in cat affected areas, pricing rise in property and loss amplification via social inflation in the long term[vi].
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TECHNOLOGY
Technology remains a critical focus area for the industry at large in 2025, especially pertaining to eliminating inefficiencies. If the property market does continue to soften as we move through 2025, E&S players will need to focus more on bottom line growth. AI is likely to dominate market discussions for 2025 and beyond. AI technology is moving from the pilot stages towards adoption as brokers and carriers strive to become more efficient in their processes, especially for small business transactions. Technology-based distribution models and algorithm-driven underwriting programs will continue to become more prevalent as the E&S market evolves in today’s digital world.
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OUR PROMISE TO YOU
Throughout these market challenges, RT Binding teams are accessing a plethora of markets and employing diverse strategies to assist retail clients with property and casualty placements. From simple to difficult, we strive to deliver solutions for our clients; together we can successfully navigate the E&S landscape in 2025.
[i] https://www.insuranceinsider.com/article/2ebu9otg5nb3iqlnmvrpc/all-topics/catastrophe-losses/la-wildfires-enough-to-slow-the-cat-market-turn
[ii] https://www.insuranceinsiderus.com/article/2eadqj21yy2tyiop11wjk/lines-of-business/commercial-lines-insurance-news/case-for-structural-e-s-property-shift-strengthens-as-rates-and-flows-decouple
[iii] https://www.insurancebusinessmag.com/us/news/breaking-news/will-nuclear-verdicts-impact-the-insurance-industry-in-2025-519537.aspx
[iv] https://www.insuranceinsiderus.com/article/2e3ky0guff0qq65sy9n9c/all-topics/claims-and-losses/year-to-date-stat-reserve-analysis-this-reserving-turkey-is-down-to-the-bone
[v] https://www.insuranceinsider.com/frictionless-article/2e8dtzk3r8t4t6tmiefi8/all-segments/insurance-broker-news/high-reinsurer-confidence-at-1-1-renewals-expanded-capacity-gallagher-re
[vi] https://www.insuranceinsiderus.com/article/2eadqj21yy2tyiop11wjk/lines-of-business/commercial-lines-insurance-news/case-for-structural-e-s-property-shift-strengthens-as-rates-and-flows-decouple