The US property and casualty insurance market remains stable at the start of 2025, but economic uncertainty, social inflation, and shifting risk factors are creating challenges for insurers and policyholders, according to the latest Lockton Market Update.
The quarterly report from Lockton highlighted key trends shaping the commercial insurance sector. While insurers have maintained capacity across most major lines, rising litigation costs, regulatory shifts, and the evolving economic landscape are pressuring certain segments of the market.
Among the primary concerns is social inflation, which continues to drive up claims costs, particularly in liability lines. The growing impact of nuclear verdicts—jury awards significantly exceeding historical norms—has led to tighter underwriting and rising premiums, especially in general liability and excess casualty.
Catastrophic weather events are also influencing market conditions. While the frequency of severe storms, wildfires, and other climate-related losses has kept property insurance rates elevated in high-risk regions, improved risk modeling and capital inflows have helped stabilize pricing in other areas.
Despite these challenges, insurance buyers are seeing favorable conditions in several key lines, according to the report. The workers' compensation market remains competitive due to strong underwriting results and improved workplace safety measures. Directors and officers (D&O) liability coverage has also softened after years of hard market conditions, driven by increased competition among insurers and a more predictable regulatory environment.
Cyber insurance, which experienced sharp price increases in recent years due to ransomware threats, has begun to level out as insurers refine risk assessments and businesses adopt stronger cybersecurity controls. However, evolving risks related to artificial intelligence and regulatory scrutiny could impact long-term pricing trends.
“Major industry headwinds such as social inflation, natural catastrophes, climate change, trade wars, tariffs, and regulatory changes are adding to the market uncertainty," said Vince Gaffigan, executive vice president and director of risk consulting at Lockton. "Now, more than ever, businesses should be reevaluating their insurance programs to safeguard their operations and protect their balance sheets."
Looking ahead, businesses are expected to face continued volatility in liability lines, while property insurers assess their exposure to climate-related risks. The financial strength of insurers, ongoing regulatory developments, and macroeconomic conditions will all play a role in shaping the market in the months ahead.
While uncertainty remains, Lockton’s report suggests that insurance buyers who proactively assess their risks, adjust coverage strategies, and work closely with brokers and underwriters will be better positioned to manage market fluctuations in 2025.
