USI says ample capacity keeping property market competitive as excess casualty ticks up

By Chris Munro

June 4 - (The Insurer) - Ample U.S. property insurance capacity means pricing dynamics will continue broadly unchanged in 2025’s second half despite elevated catastrophe losses, while casualty is more mixed with certain segments set for further price rises, USI has forecast.

There was an estimated $140 billion of global insured natural catastrophe losses in 2024, making it the third costliest year on record, USI said.

That has been followed by more than $50 billion of global insured natural catastrophe losses in the first quarter of 2025, largely from the California wildfires.

Despite these losses, and forecasts for higher-than-normal hurricane activity this year, USI said the insurance and reinsurance markets are well capitalised and ample capacity remains.

In its 2025 Commercial Property & Casualty Market Outlook Mid-Year Addendum, USI said property renewals in the first half of 2025 saw increased competition and deployment of additional capacity on programs, along with widespread rate decreases and improvements to terms and conditions.

The broker said single-carrier programs started to have rate decreases, while intense competition for shared and layered programs, especially accounts with high-quality risk profiles, led to rate reductions of 5% to 30%.

“London and Bermuda contributed heavily to the competitive environment, in some cases replacing incumbent single carrier programs, resulting in a 30% premium savings over an incumbent renewal offering,” USI said.

During the first half of 2025, USI said rates for catastrophe-exposed property risks with a favourable risk profile and minimal loss history varied between minus 20% to flat.

And property risks with an unfavourable loss history or risk profile, regardless of whether they had catastrophe exposure or not, had rate changes ranging from minus 10% to up 10% in 2025’s first half.

USI expects those trends will be maintained through the remainder of this year.

FURTHER NON-CAT PROPERTY RATE CUTS

Rates for non-cat-exposed property with minimal loss history and a favourable risk profile ranged from minus 5% to up 5% in 2025’s first half, and USI expects clients will see improved pricing conditions during the latter part of this year, with rate movements of minus 10% to flat.

The broker said some risks remain challenging to place because of limited insurer appetite, for example those accounts with wildfire exposure, or older wood frame habitational units, subsidised housing and food manufacturing.

Such risks may not experience the decreases or improved terms seen in the broader property market, USI suggested.

More broadly though, USI said clients will have opportunities to expand coverage, purchase higher limits, reduce deductibles, improve terms and reduce premium costs.

“Capital continues to flow into the insurance and reinsurance markets, providing the environment for additional softening,” the broker said.

As USI explained, strategies that had the most impact on premium savings, for example cancelling or rewriting an existing program, will begin to have diminishing returns once the higher-priced capacity from 2024 is replaced.

Consequently, insureds whose coverage effective dates are in October through December may not see the savings found in the first half of 2025 with these strategies.

RISK-MANAGED UMBRELLA/EXCESS PRICING TO RISE

In casualty, USI predicts that many of the pricing trends witnessed in the first half of 2025 will continue through the remainder of the year, although risk-managed umbrella and excess liability programs could see rates tick up.

And USI expects increases in pricing for guaranteed-cost workers’ compensation coverage could also accelerate.

Capacity for commercial auto, general and product liability, along with umbrella/excess liability lines, remains adequate, USI said, with rate increases generally stabilising for most insureds.

The broker said rates for middle-market buyers are expected to be flat to up 10%, while risk-managed accounts can anticipate increases of up to 20% during the second half of 2025, depending on prior loss history and class of business.

USI said potential savings can be sourced by combining umbrella liability with other lines, for example primary casualty and property.

WORKERS’ COMP NEW ENTRANTS

In workers’ comp, the market generally remains profitable for most insurers, both on a guaranteed-cost and loss-sensitive basis, USI said.

Rates have on average reduced across most states year on year, and capacity remains plentiful, boosted by new entrants, said USI.

As a result, even with higher payrolls, clients have benefited from both rate and premium decreases.

USI suggested that while insurers are carrying adequate reserve redundancy, releases are slowing, and that could result in rates levelling off or more moderate increases in some states during the remainder of the year.

Another key consideration in whether workers’ comp premiums remain flat or decline in the coming year is that potential rate reductions must be at least matched or exceeded by declining claim costs.

But, as USI noted, this trend is slowing down or reversing in many states, in part because medical severity costs are ticking up.

“While the frequency of medical injuries remains low, higher medical severity costs and rising indemnity payments for wage replacement are contributing to a gradual rise in claim costs in many states,” USI said.