Baldwin: Commercial insurance landscape shows resilience amid rising costs in auto and umbrella lines

By Mia MacGregor

May 1 - (The Insurer) - The first quarter of 2025 demonstrated resilience in much of the commercial insurance landscape, although areas such as commercial auto and umbrella continue to show signs of loss cost pressure with pricing continuing its upward trend, according to a new state of the market report from The Baldwin Group.

The report noted that favorable reinsurance renewals, broader market competition and expanded capacity from MGAs and the London market contributed to recent softening trends across the commercial insurance landscape, particularly in property.

However, it cautioned that continued climate volatility, inflation and evolving regulatory factors could influence the market trajectory over the remainder of 2025.

Baldwin highlighted that cyber, management liability and workers' compensation lines remained relatively stable, with innovations in underwriting, sustained carrier capacity, and moderating loss trends creating a favorable environment for insureds in these sectors.

However, commercial auto and umbrella lines saw over 10% year-over-year price increases, driven by persistent loss trends, rising repair costs and social inflation.

In commercial auto, the issues that have negatively affected the market in the past decade are continuing in 2025.

Baldwin warned that nuclear verdicts, litigation funding and aggressive plaintiff tactics are worsening loss trends for U.S. risks, with ongoing pricing pressure expected to persist, potentially increasing further if inflation reverses.

In the umbrella sector, underwriting caution remains prevalent in high-risk industries and for those accounts with significant auto and premises liability exposure, with moderate upward pricing pressure anticipated into the next quarter, according to the report.

In the property insurance market, Baldwin observed resilience similar to the broader commercial insurance landscape, with a significant deceleration in year-over-year rate increases, from 13.2% in Q1 2024 to 3.0% in Q1 2025, despite ongoing climate-driven loss activity.

Baldwin advised clients with exposure to peak catastrophe zones to remain vigilant to account-specific reversal of these trends after a series of early-year natural disasters, including California’s January wildfires that significantly affected catastrophe budgets.

Additionally, the broker warned that tariffs imposed by President Trump are likely to place significant upward pressure on rebuilding and repair costs, since the price of goods and materials which are sourced globally will rise.

Looking ahead, Baldwin said that continued moderate softening is likely to persist into the next quarter barring catastrophic events.

The approaching 2025 storm season and major June 1 and July 1 reinsurance renewals are expected to dictate the remainder of the year, according to the report.